Air Cargo Insurance: What It Means and How It Works

Air cargo insurance is a coverage that covers the buyer or seller of items being carried by air. It reimburses the insured for damaged, destroyed, or lost commodities and, in some situations, may even compensate for shipment delays.

Marine cargo insurance is similar to air cargo insurance in that it protects commodities moved by water.

Understanding Air Cargo Insurance

Air transport has developed as one of the quickest, safest, and most cost-effective methods of transporting commodities throughout the world. Most air freight carriers give a minimum amount of carrier liability insurance for all freight. However, this coverage is generally insufficient. It frequently contains numerous exclusions, including floods, earthquakes, and natural disasters, and it generally does not give reimbursement for high-value or delicate things.

Because of these constraints, many large shipping businesses have sought supplemental insurance to protect themselves against damage, theft, missing merchandise, and, in certain situations, the cargo failing to arrive on schedule, resulting in a corresponding loss. Some insurance companies, as well as freight forwarders and trade-service intermediates, provide direct air cargo insurance.

The level of coverage and the deductible—the amount of money a policyholder pays for expenses before the insurance plan begins to pay out—required for air cargo insurance vary depending on the items and the specific provider. Payments differ as well, and are often calculated based on the value of the insured objects, if they are dangerous, where they are being transported, and the route that they will travel to their destination.

While individuals occasionally purchase air cargo insurance, businesses purchase it considerably more frequently to send inventory to clients and distributors in the United States and around the world. In reality, some large corporations may have one or more staff who deal only with air cargo and other freight insurance claims.

Types of Air Cargo Insurance

Air carriers are required to have liability insurance, although this is unlikely to suit the demands of the majority of cargo shippers. There are also other types of cargo insurance, each with a distinct level of coverage and risk protection. Many forms of partial coverages may exclude damages caused by faulty packing, pests, weather, or client delivery refusal.

There are, however, more comprehensive plans available that provide greater peace of mind. Full-risk air cargo insurance, for example, often protects against practically all sorts of damage or loss. Understandably, such coverage is more expensive. It is also quite uncommon and may exclude older goods or those susceptible to breakage, deterioration, or loss. It may also refuse to pay claims resulting from war, civil arrest, customs denials, or natural disasters.

Some insurers also provide contingent liability coverage. When a sales contract compels a customer to accept products on delivery, regardless of whether those items were damaged during transit, this sort of insurance may be preferred.

There are various types of air cargo insurance that cover the full mode of transportation, which may include ground shipping after the goods arrive at their destination airport.

The Bottom Line

Air cargo insurance protects business products being shipped by air. This sort of insurance may cover damage during loading and unloading, customs complications, and delays caused by weather or natural catastrophes, depending on the policy.