International shipping can be risky for companies that don't properly protect themselves against some of the precarious realities of international trade. For instance, piracy around the world more than doubled in the first 6 months of 2009 compared with the same period a year earlier, according to the ICC International Maritime Bureau's Piracy Reporting Centre. In addition, shipping accidents and inclement weather such as hurricanes and tropical storms can wreak havoc on businesses transporting goods from overseas.

To help you become more knowledgeable about how your clients currently attempt to protect their goods, here are 10 questions you should ask to help you uncover coverage gaps and offer solutions to ensure their businesses are adequately protected from the risks of international trade:

Do your clients' current cargo insurance providers protect their goods via all modes of transportation, including ship, airplane, train, and truck? A sound cargo insurance policy should offer complete protection along with consistent rates and deductibles, regardless of the mode of transportation used to move the goods. If the goods move from a ship to a truck for transportation to their final destination, the policy rates and coverage limits should not differ based on mode of transportation. The best policies do not expose a business to gaps in coverage as goods move from one transportation mode to another.
Have your clients experienced any problems filing claims for lost or damaged goods with their insurance provider, such as time delays or other hassles? Most providers offer only a few days for clients to file claims, while others can offer a window of 30 days for filing a claim.
Do your clients inspect all goods upon delivery, even if the packaging appears to be unharmed? If the packaging of your clients' shipment appears unharmed when it arrives at its destination, but the goods inside are broken or damaged, your client will want an insurance plan that enables them to file a claim once the damage is discovered, even if that is days or weeks down the road. Some insurance providers give you only a few days to discover the damage and file a claim, while other insurers offer up to 30 days to report damage from the time the shipment arrives at its destination.
Do your clients understand their full exposure? There are many hidden risks when it comes to trading internationally. For example, goods may be on a ship that encounters issues at sea and must jettison containers during the voyage in order to return safely to port. Even if goods arrive safely at their destination, your client may be liable for a portion of the loss or damage of other goods on the vessel, even if they are not your client's property. A top-notch cargo insurance provider should have expertise in the international movement of goods to offer full protection of your client's goods.
Do your clients buy insurance to protect their goods from a general liability insurance provider or a cargo insurance provider that is experienced in supply chain management and transportation? Cargo insurance providers should be able to couple service with expertise in multiple modes of transportation, customs brokerage, and moving goods internationally. Having this background knowledge and know-how is critical to protecting fully your client's goods.
Do your clients know at what point they assume ownership of goods along the supply chain, as laid out in the policy? If not, they should consult the terms of sale between them and their suppliers so they know exactly when they take ownership of goods in transit, which has major implications on cargo insurance policies. Do your clients know if they assume the risk and responsibility for the goods at the leading point of the shipment, or if the risk and responsibility is still in their supplier's hands? Once you can identify the point at which your clients take ownership of the goods, you can work with your clients to make sure that their cargo insurance policies covers the goods from that point forward.
Are your clients' goods covered while they are sitting in a warehouse and not in transit? It's common for goods to come into the U.S. and sit in a freight forwarder's warehouse as they wait for other goods to arrive before being consolidated and shipped to their final destination--which can take weeks. Ensure the best policy for your clients by determining that any existing coverage also covers their warehoused goods.
Are your clients covered if their trading partners refuse to honor their responsibility to pay for damaged goods? Even if ownership terms are in place and the buyer has taken ownership of in-transit goods per those terms, that buyer may still refuse to pay for goods damaged while in transit. Of course, your clients should enforce their sales contracts, but that can sometimes be difficult to do, especially overseas, and can even lead to considerable legal expenses. In this case, contingency coverage in addition to a cargo insurance policy can help cover shipments that your clients were not required to insure.
Do your clients know that cargo coverage is available as an alternative to insuring their shipments one container at a time? If your clients are insuring shipments one container at a time, consider an "open cargo insurance" policy type of coverage, which can save money by providing a comprehensive insurance policy to protect all of your clients' goods in transit. Based on the volume of shipments your clients typically handle and the size of your clients' company, an open cargo insurance policy may make sense.
Are your clients' current insurance providers providing the level of service and counsel that your clients need in order to thrive? So much of today's trade is in perpetual motion, moving around the world, into containers, onto ships, over the ocean, through customs, across borders, into warehouses, onto trains, into trucks, stored in warehouses, and so on. These are all the ingredients that increase risk in international trade. Insurers that offer free cargo risk assessments can help you and your clients learn more about what kind of risks businesses face and understand the types of insurance that can protect against the risks associated with international trade.

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Special Reports /

Cargo insurance: 10 questions to help cover clients

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