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Details on Domestic and International Cargo Insurance

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Transportation of goods whether on air, water or road faces many risks. Therefore, all carriers are required by law to get a carrier liability. This is an insurance that covers cargo from imminent risk. However, given that it provides very limited coverage, shipping companies are also required to carry an insurance, protecting the said goods from damage or theft due to natural disasters, accidents, or acts of war. This is known as cargo insurance, and it offers protection against such risks when goods are in transit until they reach the owner.

Shipping companies can take the cargo insurance cover for either domestic or international transportation. However, given the varying nature of this insurance, it gets very hard to control or even standardize the operations.  This is because in some countries, particularly the US, each state controls its insurance industry. Therefore, there may be varying laws for each state.

The goods news is, there are certain concepts that still remain the same, in all states. To begin with, cargo insurance is considered domestic if the insurance is offered within an office in a particular state.

If you take a cargo insurance in a different state or country, this becomes international cargo insurance. The insurers are considered foreign, or excess lines, surplus lines or non- admitted. To offer cargo insurance in the state they operate in, these insurers must qualify with each state authority separately.

This does not mean that international insurers have it hard than their domestic counterparts. However, it only goes to show that they are just not available in a state where you want to take your cargo insurance.

Another notable difference between the two types of cargo insurance is that domestic insurers are required to contribute to their state’s solvency fund. These are the funds earmarked to pay for any bankruptcy claims in the state. International cargo insurers, on the other hand, are not legally bound to contribute to the fund. However, they may be required to establish a separate fund for the state, which is duly recognized by all states. This is controlled by the National Association of Insurance Commissioners.


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