Cargo insurance deductibles

Have you ever thought of unleashing trapped cash which is below your insurance deductibles e.g. amounts you absorb after insurance pay for cargo damage?

In the market marine cargo, insurers offer different types of coverage and different deductibles.

One way to lower your premium is to agree to a higher deductible so you take on more initial liability and the insurer takes on less. Another is to eliminate optional coverage lines that you might not need.

For instance, if you store your goods in an insured warehouse, you might not need storage coverage with your marine policy. Or you may have a $1,000 deductible, but claims due to theft may come with a $5,000 deductible.

All of these affect the cost of the premiums you will pay. In general, the higher the deductibles and the more exclusions, the lower the premiums. The tradeoff, of course, is that if you have a claim, you will pay more out-of-pocket.

In case you read that far, means you care about paying less when cargo is damaged in transit.

Let’s explore below 2 scenarios: 

1. HIGH DEDUCTIBLES. Sugar trader in Dubai has cargo insurance:

• Insurance policy with 10 000 USD deductible per container.
• In 2019 he had 29 cases of cargo damages. Water ingress mainly.
• All incidents — below the deductible.
• And ZERO compensation claimed from the liable for damage party.

Here are the biggest trap exporters and importers fall thinking that it is not worth to pursue cargo claims for compensation if cargo is insured. Or even worse, to absorb the loss for the first, second claim and end up the year with 29 damage cases. All losses out of the pocket, not to mention insurance premiums paid.

2. DIFFERENT DEDUCTIBLES for the same cargo.  One of our  customers  had an insurance policy with the below clauses:

• 500 USD deductible for water ingress damage
• 2000 USD deductible for condensation.

The catch was that customer as per insurance policy had to appoint Surveyor every time to assess the damage. It happened to be that  Insurer’s   Surveyor kept issuing Survey reports without physically inspecting cargo. In the survey reports the cause of damage was always condensation. Condensation damage is an exporter’s liability, that’s why Insurance company not only ALWAYS applied higher deductible to pay a claim, but also increased insurance premiums year after year.

The 2 scenarios show that financially is really worth getting back what is owed to you despite insurance policy, deductible amount, or scope of coverage.