It is a common practice in the commercial world to insure goods in transit. Briefly, the following reasons compel traders to contract transport insurance:
- Protection against financial losses resulting from damage, pilferage, theft and non-receipt of entire or part of a consignment; and
- Protection against financial claims that can be made against the owner of goods on board a vessel in case of a “declared general average” (the goods themselves being undamaged).
- The value for insurance is usually calculated as follows: cost of goods + freight and shipping cost, plus an uplift of 10% to cover administrative expenses and increases in price if goods have to be re-ordered.
Typical calculation: Value of goods + Cost of Transport) x 1.10 = Insurance Value
- What additional risks to cover vary from commodity to commodity; they are not the same for glassware, iron pipes and vehicles, for instance. If a buyer has negotiated a floating policy where all usual risks and special coverage are included, then any consignment benefiting from these conditions will be insured to the maximum extent. If coverage is arranged case by case, then the request for coverage should specify what is required: normally all risks, war, strike and civil commotions.