Marine cargo: open policy or single shipment?

If you move goods more than a few times a year, the way you buy cargo cover changes your admin, your premium, and the moment your goods become insured.

Marine cargo insurance covers goods in transit — by sea, air, or land, despite the name. For Philippine importers, exporters and domestic shippers, the practical question is rarely whether to insure. It is how to structure it.

Single shipment cover

A single shipment policy, sometimes called a specific policy, covers one consignment from one origin to one destination. You arrange it before the goods move, declare the value and the route, and the cover ends on delivery.

It suits you if: you ship occasionally, values vary wildly, or this is a one-off consignment outside your normal pattern.

The friction: every shipment needs arranging in advance. Miss it and the goods travel uninsured. For a business shipping monthly, that is twelve opportunities a year to forget.

Open policy cover

An open policy is a standing arrangement covering all shipments falling within its terms for a defined period, usually a year. Instead of arranging cover per consignment, you declare shipments as they occur — often monthly — and cover attaches automatically the moment goods leave the warehouse.

It suits you if: you ship with any regularity, on reasonably consistent routes and commodity types.

The advantages are structural, not just administrative:

• Cover attaches automatically. There is no window in which goods are moving uninsured because someone was on leave.
• Rates are agreed in advance, so pricing is predictable and usually better than repeated one-off arrangements.
• Declarations can follow the shipment, which matters when goods move at short notice.
• Certificates can be issued against the open policy where a letter of credit or a buyer requires evidence of cover.

What the Incoterm decides

Before choosing a structure, establish whether the risk is even yours. The Incoterm in your sales contract determines who bears the risk during transit and at which point it transfers.

Two traps recur. On FOB imports, risk passes when goods cross the ship's rail, so an importer assuming the supplier's insurance covers the voyage is often wrong. On CIF, the seller may only be obliged to buy minimum cover, which can be considerably narrower than you would arrange yourself.

The cover clauses

Marine cargo cover is usually written on one of three Institute Cargo Clauses:

• Clauses A — the broadest, covering all risks of loss or damage subject to the stated exclusions
• Clauses B — a narrower named-perils basis
• Clauses C — the narrowest, covering major casualties such as fire, stranding, sinking and collision

The difference is not academic. Under Clauses C, ordinary handling damage or pilferage is generally not covered at all. Buyers comparing two quotations on price alone frequently compare a Clauses A policy against a Clauses C policy without noticing.

Common exclusions

• Insufficient or unsuitable packing — the most frequently declined cargo claim there is
• Inherent vice — goods that deteriorate by their own nature
• Ordinary leakage, wear and tear
• Delay, even where delay caused the loss
• Insolvency of the carrier

Packing deserves attention because it is within your control. If goods are damaged and the surveyor concludes the packing was inadequate for the voyage, the claim can fail regardless of what happened in transit.

Documents a cargo claim needs

• The policy or certificate of insurance
• Bill of lading or air waybill
• Commercial invoice and packing list
• Survey report on the damage
• Evidence of the claim lodged against the carrier
• Photographs of the damage and the packing as found

That fifth item is the one people miss. Carriers operate under short time bars — sometimes only a few days from delivery. Failing to notify the carrier in time can prejudice your insurer's recovery rights, and therefore your own claim. Notify the carrier immediately, even before you know the extent of the loss.