The Importance of Goods in Transit Insurance

The insurance industry is one that has long been one of the world’s largest and most important.

This is mainly due to the peace of mind that it can bring to those who value their property and need to make sure that they will not lose everything even in the unthinkable event that their belongings are lost or damaged. In such a situation, having adequate insurance can make the difference between being able to replace certain possessions, and having lost them (and the money they cost) for good. As such, being aware of various insurance options that might be useful to you can be of great importance, particularly if a worst-case scenario should strike unexpectedly.

Goods in transit insurance is one type of insurance coverage that has risen steadily in popularity and affordability over the years with the rise of globalization. In today’s world, goods can be and frequently are purchased remotely and/or delivered between various parts of the world.

package delivery

Transferring items between buyers and sellers may appear a relatively straightforward process, and in fact, when the process goes smoothly and the package is delivered on time, we are sometimes not even aware of what it took to get it to its destination. Along the way, there are often many risks involved, and sometimes these can lead to property being lost or damaged along the way. Goods in transit insurance exists to cover the costs of any mishaps that may befall property that is being transported from one location to another.

Understanding goods in transit insurance

In general, goods in transit insurance applies to items that have been shipped by a seller, but have not yet been received by a buyer, and is aimed at protecting both parties in the event that the goods do not make it to their destination intact. In many cases, this kind of insurance is required by law or company policy in order to provide the necessary protection of interests and prevent legal problems from arising in the event that a complication arises in the transit process.

Terms and conditions

However, the terms of different purchase agreements do differ, and the responsibility for any loss or damage incurred may rest alternately with the buyer or the seller in each specific case. It’s therefore highly important for both parties to be fully aware of these terms and conditions, which may include a requirement for one or both parties to take out goods in transit insurance on the goods in question. Even where insurance is not legally required, it can be in both parties’ best interests to take it out anyway in order to protect financially valuable assets from unexpected loss or damage.

The insurable amount

As with many types of insurance, deciding on the correct insurable amount is a process that requires some consideration. Generally speaking, to provide maximum safety, the policy taken out should be sufficient to cover the maximum value of the goods in transit. Many cargo policies include the value of the goods themselves in addition to the freight charge and an advance to cover any unforeseen shipping and handling costs in the total insurable amount. Importers and exporters may also choose to insure their goods based on the sale price alone.

In many situations, relying on either the buyer’s or the seller’s insurance can be sufficient but it is important to make sure that the specific policy that has been taken out is sufficient to cover the shipment in question. This is particularly true where an ongoing trading relationship is in place in which many shipments of different cargo are made. In such cases, it’s essential to ensure that the terms and conditions, valuation, and limitations of the insurance agreement allow for all the necessary shipments to be covered. If not, additional policies may need to be taken out to cover shipments that do not fall under the coverage of the existing one.

Risks and restrictions

While generally cheaper, a potential pitfall that can arise when relying on common carrier insurance (such as that provided by professional shipping companies) as opposed to a third-party insurance policy, is that there are many situations in which the carrier may be held exempt from liability for loss or damages to the goods in transit provided these were not caused by negligence on the part of the shipping company. This is particularly important for goods that travel overseas, as there are many factors outside of the control of the shipping company (such as inclement weather) that can and often do result in goods being lost at sea or in other phases of transit. In such a situation, even if the company’s existing insurance policy does cover some of the goods in question, the payout is often comparatively low.


Another important consideration to take into account is that goods in transit insurance most often covers goods that are specifically in transit – that is, on the move. If goods need to be stored temporarily before being transferred to their final destination (due to an interruption in the transit process or some other reason), many goods in transit insurance policies do not cover the items while they are in storage, leaving them vulnerable should the worst happen.

Options and alternatives

Many well-known insurance firms offer various goods in transit insurance policies that, while often more costly that the in-house versions provided by large retail corporations and/or shipping companies, do tend to have fewer restrictions on coverage as well as more reliable and effective payouts. For those who are more financially confident, self-insurance can also be an option, provided that you understand the risks involved and are able to dedicate the resources necessary to the investigation, mitigation, and resolution of a loss of cargo.

Regardless of the type of goods in transit insurance you choose, it goes without saying that the importance of this kind of insurance cannot be overlooked when moving goods from place to place. Whether you are simply purchasing an item over the internet, or are responsible for the large shipments of an international company, understanding goods in transit insurance forms an essential part of your decision-making process.

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