Logistics Cargo Shipping Insurance | A Simple Explanation

If you ship domestic cargo, there is always the concern that something could go wrong during the delivery process — such as lost goods, damage from improper stacking, or even theft during transit. So how do Logistics Managers and business owners address these concerns? The answer is shipping insurance. Shipping insurance is a preventive measure that provides protection against the risk of damage, loss, or theft of goods during the shipping process. 

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What Is Cargo Shipping Insurance?

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Image: Linkedin ABC Express Cargo

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Cargo shipping insurance — also known as cargo insurance or freight insurance — is a type of financial protection that covers goods throughout the shipping process.

Goods transported from one location to another are guaranteed safe, and in the event of an incident, the insurance will provide compensation to the cargo owner. 

In a logistics context, insurance acts as a balancing mechanism, reducing financial impact and maintaining supply chain reliability. It is therefore essential for logistics managers and business owners to understand just how vital insurance is to keeping operations running smoothly. 

Many logistics managers and business owners choose to use insurance not only to protect against risks that may arise during shipping, but also to avoid financial losses and to maintain customer trust.

This article takes an in-depth look at the importance of insurance in domestic shipping. From its benefits to the claims process, we will break down every aspect that Logistics Managers and business owners in Indonesia need to understand.

So let us continue this discussion to better understand how shipping insurance can serve as a key pillar of success in domestic logistics.

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Why Do You Need Shipping Insurance?

Consider the risks you face when shipping without insurance. 

Risks that may occur during the shipping process include:

1. Lost goods: Shipments travel to distant locations and pass through many transit points along the way.
2. Damaged goods: Damage can result from improper stacking, accidents during transit, careless handling, or adverse weather and road conditions.
3. Theft: Bad actors may exploit vulnerabilities in the supply chain to steal goods.

Imagine shipping goods without insurance — both sender and recipient would have to absorb the financial loss directly, and it would erode trust between all parties involved in the transaction.

The Difference Between Shipping With and Without Insurance 

Shipping goods with insurance provides security through an insurance policy — a written contractual agreement between the insurer and the insured. The policy specifies the compensation amount payable in the event of damage or loss. This gives shippers peace of mind, knowing that their goods are protected against these risks. 

In contrast, shipping without insurance means the shipper bears all risks alone, with no guarantee of reimbursement if goods are lost or damaged.

For example, if a company ships electronics to a customer without insurance and the products are damaged in transit, the company must bear the full cost of replacement or repair. However, if they had used insurance, the replacement or repair costs would be covered by the insurer, minimising the financial loss.

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Read also: Cargo Shipping Insurance

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Case Study: Ice Cream Shipment Insurance

A global freight company faced a challenging situation during the transport of ice cream from Switzerland to Dubai by air freight. 

The perishable nature of the product required specialised handling and a temperature-controlled environment.

In transporting 95 boxes of ice cream valued at USD 97,000 on a 7-hour flight, the client entrusted the airline with maintaining the required temperature in the cargo hold. 

Unfortunately, due to a miscommunication by airline staff, the refrigeration units were not connected. 

As a result, the ice cream melted during the flight and deteriorated further upon exposure to Dubai's heat after landing.

They had insurance and were able to recover losses totalling USD 110,500 (HKD 861,118), covering the cost of damaged goods, freight charges, storage, repackaging, and disposal.

Thanks to cargo insurance, the company was able to continue its operations without suffering a significant financial blow from the incident.

Source: Freepik

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Types of Freight Insurance

According to the OJK website, freight insurance covers 3 categories:

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Marine Cargo

Marine Cargo Insurance is insurance for goods carried aboard a vessel. Marine cargo is one of the most commonly used types of insurance in international trade. Coverage conditions for marine cargo insurance in Indonesia follow the ICC (Institute Cargo Clauses) standards in effect since 1 January 1982, including ICC (A), ICC (B), and ICC (C), each offering a different level of risk coverage.

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Inland Transit (Goods in Land Transit)

Air cargo insurance coverage is in principle similar to marine cargo, but with specific exclusions for risks associated with air transport, such as general average and both to blame collisions, which do not apply to air shipments. As with marine cargo, air cargo insurance uses the ICC (Air) clauses.

Air Cargo

Inland transit insurance covers goods shipped by road without involving a vessel or aircraft. The coverage provided varies and can be customised by the insurance company depending on the type of goods and the shipping route.

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Goods That Can Be Insured for Domestic Shipments

It is important to identify the types of goods that can be insured for domestic shipments in order to understand why some goods require more coverage than others. 

Selecting the goods that truly need insurance protection is a strategic step in risk management and supply chain continuity.

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1. High-Value Goods

High-value items such as jewellery, expensive electronics, or luxury products are often prioritised for insurance coverage. 

Insurance provides protection against significant financial losses in the event of damage or loss.

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2. Fragile Goods

Goods that are easily broken or damaged, such as glassware, ceramics, or other fragile items, require insurance to protect against the risk of damage during shipping.

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Read also: 5 Safe Ways to Pack Fragile Items

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3. Easily Lost Goods

‍Small or high-value items that are easily misplaced, such as small electronics or jewellery, may require additional insurance to protect against the risk of theft or loss.

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4. Perishable Goods

‍Goods that spoil easily or have an expiry date, such as fresh food products or pharmaceutical goods, often require insurance to protect the value of the cargo during transit.

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Why Do Some Goods Require More Insurance Than Others?

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1. High Value: High-value goods tend to require more insurance coverage due to the greater potential for financial loss.

2. Risk Profile: Goods with a high-risk profile — such as fragile or easily lost items — require insurance to address those specific risks.

3. Perishable Nature: Goods that spoil easily or have a limited shelf life require specialised coverage to ensure their safety and integrity throughout the shipping process.

Understanding which types of goods require insurance helps logistics companies and business owners make informed decisions to protect their investments and maintain cargo quality throughout the delivery journey.

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The Domestic Shipping Insurance Claims Process

Source: Freepik

Filing a domestic shipping insurance claim requires a thorough understanding of the steps involved. 

The following outlines the general stages of the insurance claims process:

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1. Claim Notification

Once a loss or damage has occurred, the insurer must be notified immediately. The claim notification must be submitted in accordance with the procedures specified in the policy.

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2. Loss Documentation

The policyholder must provide documentation to support the claim, such as proof of damage, proof of ownership, and shipping records. Complete documentation accelerates the claim evaluation process.

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Read also: 8 Trusted Logistics Companies in Jakarta 2023

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3. Claim Assessment

The insurer will conduct an assessment of the reported loss or damage. This involves reviewing documentation, verifying the incident, and evaluating the value of the loss.

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4. Claim Approval

If the claim is deemed valid, the insurer will issue approval to proceed. At this stage, the compensation amount to be paid can also be determined.

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5. Claim Payment

Following approval, the insurance company will process the claim payment. The policyholder will receive compensation in accordance with the agreed amount.

It is important to note that the claims process may vary depending on the insurance company and the type of claim. 

Active engagement throughout this process helps ensure that claims are resolved efficiently and in accordance with the applicable terms.

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Conclusion

In domestic cargo shipping, concerns about risks such as loss, damage, or theft during transit are common. To address these concerns, Logistics Managers and business owners are advised to use shipping insurance. This insurance serves as a preventive measure, providing protection against the risk of cargo damage, loss, or theft.

So make sure you use insurance when shipping your goods! With insurance, you can ship with confidence because:

1. Comprehensive Protection: You are covered against risks that may arise during shipping.
2. Peace of Mind: With insurance in place, you can ship your goods with confidence — whether to major cities or remote areas.
3. Reliability: Whatever you ship — books, clothing, food, vehicles, machinery, or radar equipment — the safety of your goods is guaranteed.

At ABC Express, as a trusted domestic logistics service, every shipment comes with insurance as standard, ensuring your goods arrive safely and on time.

Ship your valuable goods with ABC Express! Contact us here for more information.

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