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Inland marine insurance vs. ocean insurance: What’s the difference?

A cargo ship docked at a busy port.

Sometimes, bad things happen to good cargo. From storms and fires, to accidents and thefts, to the risks associated with increasingly larger ships and the evolving threat of piracy, unforeseen incidents can have an enormous impact on the health of your supply chain.

Each year, as many as 92 percent of shippers claim to have experienced some form of loss, damage or delay. And since these incidents can affect between 10 and 15 percent of annual shipments, it’s especially important that your cargo is covered, regardless of whether you’re shipping by land, air or ocean. Find out how insurance can help keep your cargo covered, how to choose between the different types of marine insurance, and the benefits of working with a logistics partner.

The different types of marine insurance

Marine cargo insurance, in the broadest sense, refers to insurance that covers goods which are being shipped or held between their point of origin and destination. There are two main forms of marine insurance: inland marine and ocean marine. Put very simply, ocean marine covers goods moving internationally, whether you’re shipping via land, ocean or air, and is primarily aimed at companies that are involved in international commerce, and inland marine insurance is mostly aimed at domestic commerce, providing coverage for your cargo when it’s in transit over land, either by air, rail or truck.

Whether you have inventory stored in multiple locations, goods that move using multiple modes of transportation, or you frequently need to declare a value for carriage, a marine cargo insurance policy is likely to play a crucial role in your risk mitigation strategy. In most cases, an open cargo policy won’t provide coverage for inland transportation. To get this additional coverage, you would need to add an inland marine endorsement to your open cargo policy, or you could also purchase a separate inland marine insurance policy. To ensure you are completely covered, a comprehensive, all-risk shipping insurance policy is probably your strongest option.

The benefits of all-risk cargo insurance

According to Kristin DeBates, director of marketing communications and PR at UPS Capital, a comprehensive policy can often be the best fit. Explains DeBates, “Looking at the global economy, you’ll be hard pressed to find somebody who doesn’t ship internationally or via multiple modes of transport. There’s so much global commerce that a comprehensive policy that covers everything within your supply chain makes it easier and allows you to have coverage no matter what type of shipment or the destination.”

The benefits of a comprehensive marine insurance policy are both substantial and far-reaching. Providing you with reimbursement up to the invoice value of your goods, in addition to coverage across multiple modes, carriers and geographies, an all-risk shipping insurance policy essentially means that you don’t have to worry about coverage. Plus, fast claims reimbursement enables you to receive payment quickly and easily. Given the potential impact of lost cargo on your bottom line and brand image, that’s a significant benefit, with 52 percent of respondents to the Harris Poll study claiming that speed of payment is extremely important to them.

Another key aspect to consider is the superiority of an all-risk cargo insurance policy over carrier liability. Many shippers simply don’t know the difference between the two, even though millions of dollars could be at stake. And despite the fact that 90 percent of shippers rely on carrier liability and excess liability, a staggering 40 percent believe that cargo insurance and carrier liability are the same thing. According to DeBates, this lack of awareness mostly comes down to “years of inertia, where people continue to do the same thing without necessarily understanding it.” So, what’s the difference between carrier liability and cargo insurance?

The superiority of cargo insurance over carrier liability

According to Rockwell Pedigo, marketing manager at UPS Capital, “The key difference between carrier liability and cargo insurance is that one is an insurance policy and one is not. Cargo insurance is going to cover a wider range of scenarios in the event of loss or damage to a shipment, while carrier liability is only liability coverage provided by a freight carrier for your shipment. It’s an agreement between you and your carrier—it’s not an actual insurance policy.”

Carrier liability, while mandated in the U.S., has many exclusions. In the event that payment is approved, it will likely be paid based on weight and class of the freight. Claims can also be challenging, and you may have to fight to actually get paid. Even if you are due compensation under carrier liability, gaps and loopholes may ensure that you end up with pennies on the dollar. Plus, it’s one-size-fits-all, whereas a comprehensive cargo insurance policy can be tailored to your business’s exact needs and specifications.

Jeff Moss, underwriting manager at UPS Capital, also mentions another common pain point: “Cargo policies allow you up to 90 days to recover a loss if you find the damage after a shipment has been delivered. With the carrier’s liability, once you sign for a delivery, that’s considered to be proof that the products aren’t damaged. If you discover a loss or damage 60 days after a delivery and you don’t have insurance coverage, you likely won’t receive compensation, and that’s a big frustration point for customers.”

To get a sense of just how important it is to choose the right coverage plan, you only need to look at real-world cargo incidents. Take Argus, for example, an oil and pipeline construction company that switched from carrier liability on a shipment-by-shipment basis to a comprehensive shipping insurance policy in 2001. After two separate incidents that resulted in losses worth close to $1 million, their cargo insurance policy offered through UPS Capital Insurance Agency, Inc., helped mitigate the risk of catastrophic losses.

Why should I work with a logistics partner?

When examining your risks, consider working with a logistics expert like UPS Capital. DeBates puts it like this: “UPS has been around for over 100 years. Your typical insurance companies don’t have over 100 years of supply chain expertise, which could limit and ultimately not provide the breadth of perspective that UPS Capital offers. We understand logistics, we do it every day, and we deliver to over 200 countries using multiple modes of transportation.”

An all-risk marine cargo insurance policy through UPS Capital offers a wide variety of advantages over typical inland marine insurance and ocean insurance policies. It includes comprehensive coverage for all modes, inbound, outbound and freight collect shipments, as well as 90 days for concealed damage, quick claims resolution and warehouse coverage.* In addition, UPS Capital sales people leverage their logistics background to identify risks and coverage gaps, helping provide an improved proposal process. The use of a simple composite rate structure and insurance by an “A-rated” insurance company rounds out the benefits. In essence, the depth of coverage, in combination with their global supply chain pedigree, uniquely positions UPS Capital Insurance Agency to help mitigate risk in the supply chain.

Ultimately, marine cargo insurance is a great risk mitigation strategy. Explore the benefits of a UPS Capital insurance policy, and avoid the unpleasant surprises that may lie in store for anyone relying solely on carrier liability.

 

* Insurance coverage is underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. UPS Capital Insurance Agency, Inc., and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. The insurance company, UPS Capital Insurance Agency, Inc., and its licensed affiliates reserve the right to change or cancel the program at any time. The insurance coverage is governed by the terms, conditions, limitations and exclusions set forth in the applicable insurance policy. Coverage is not available in all jurisdictions. 

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