Air Cargo Insurance – Investopedia



WHAT IS ‘Air Cargo Insurance’

Air cargo insurance is a type of policy that protects a buyer or seller of goods being transported through the air. It reimburses the insured for items that are damaged, destroyed or lost. Some insurance companies offer cargo insurance directly, as do several freight forwarders and trade-service intermediaries. The amount of coverage and deductible required for air cargo insurance varies based on the goods, as well as the individual provider.

While individuals sometimes buy air cargo insurance, far more often companies buy it to ship their inventory to customers and distributors, both in the U.S. and around the world. Some large companies, in fact, may have one or more employees that deal solely with air-cargo and other freight-insurance claims

BREAKING DOWN ‘Air Cargo Insurance’

Air cargo insurance premiums typically are calculated based on the value of the insured items, whether they are hazardous, where they are being transported and the route that they’ll take to their destination.

A close cousin of air cargo insurance is marine cargo insurance, which protects goods that are transported over water.

Most air-freight companies provide a minimum amount of insurance for all freight, which is called carrier liability. This coverage is typically scant, however, and also may have many exclusions; it may not cover flooding, earthquakes or other natural disasters, for example. As a result, many air-cargo customers require additional insurance to guard against breakage, theft, lost merchandise, and in some cases, the cargo not arriving in time, resulting in a consequential loss.

Types of Air Cargo Insurance

Full-risk air cargo insurance typically protects against almost all types of damage or loss. It is the most expensive as a result, and it’s also fairly rare. Most types of air cargo insurance involve various types of partial coverage, which may only reimburse 60% of the inventory value, for instance.

In addition, many types of partial coverages may exclude damages caused by improper packing, infestations, weather or delivery rejection by the customer.

Some insurers offer contingent liability policies. This type of insurance may be preferable when a sales contract requires a buyer to accept goods on delivery, whether or not those goods were damaged during transit.

Some types of air cargo insurance also provide coverage during their entire mode of transit, which may also include ground shipping after the merchandise reaches its intended airport.



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