Why You Should Carry Supplemental Umbrella Insurance on Your Cargo

Posted by John Appel on Mon, May 15, 2017


It’s the news no company wants to get about their cargo. The products arrived damaged at their destination. You may have to reroute products from your warehouses to make up for the loss. Or you may have to reproduce the entire order. Either way, the issue is going to be costly.

Your immediate concern may be to correct the issue and get new product to your customer. After that, though, you’ll likely want to find out where the damage happened and how it occurred. Then you’ll probably want to identify the liable party and pursue any possible damages.

Your cash flow isn’t interrupted and your
working capital doesn’t take a hit.

Cargo damage can happen at any point along the distribution chain, from the trucking company to the packager and even to the port if you’re shipping overseas. Ideally, each distribution partner along the step carries insurance. If so, you may be able to pursue a claim to get reimbursement.

For example, if you can determine that the damage happened on the truck, the trucking company’s insurance may cover the damage. Similarly, if the damage happened at the packaging company or at the port or at any other step, that partner’s insurance should cover the damage.

cargo ship shipping catastrophe

Of course, there are a few challenges in pursuing damage claims from a distribution partner’s insurance company. One is that it may be difficult to determine or prove where and when the damage happened.

Even if you can pinpoint the source of the damage, though, you still may have to go through a lengthy bureaucratic or even legal process to get the damages paid. It could take months or even years before you see the reimbursement.

Of course, you don’t have that kind of time. Cash flow is a critical part of your business. If you have to replace the damaged cargo and foot the bill to do so, you could face substantial operating challenges.

What’s the solution? How do you protect yourself against the operational and financial risks that come with shipping valuable cargo? And how do you ensure that you get reimbursed for the damage quickly? 

Supplemental Distribution Insurance: An Easy, Effective Solution

The good news is that there are steps you can take to minimize the financial fallout of damaged cargo. One of the most effective strategies is to purchase supplemental insurance that covers the entire distribution process.

View More: Packaging Hub Guide [PDF] 📦

Supplemental insurance acts as an umbrella over the entire distribution chain. Generally the insurance covers your materials from the time they leave your facility until they reach their destination. The policy will specify a wide range of types of damage that are covered.

Should your materials be damaged in transit, the supplemental policy will pay coverage directly to you. That gives you immediate cash flow to resolve the issues related to the damage and continue with your normal operations. Your cash flow isn’t interrupted and your working capital doesn’t take a hit.

packaging process

The supplemental insurance policy then takes on the burden of determining where the damage happened and who is responsible. The supplemental insurer may even collect from the liable party’s insurer. However, that won’t be your concern because the supplemental insurer paid you immediately after the damage happen, not months or years later after the issue was finally resolved.

The best part of supplemental insurance is its affordability. It is usually priced at a small percentage of the insured amount, which isn’t too high of a price to pay to protect your cash flow and your processes.

Supplemental insurance is usually offered by partners who can manage your entire distribution chain, from packaging to logistics and shipping and more. If you’re not using supplemental insurance to protect your cargo, you could be exposing yourself to sizable risk. Deufol_Logo_opt.png Get Your Industrial Contract Packaging Quote

Topics: Industrial Packaging

Let Us Know What You Thought about this Post.

Put your Comment Below.

tough packs solved
New call-to-action