Exploring the details of goods-in-transit insurance 

CHUKWUMA ONONIWU

Chukwuma Ononiwu (FCILRM, Nig; FICRMP, U.K.), an alumnus of Abia State University and Lagos Business School Pan Atlantic University, is a consummate insurance broker, seasoned insurance consultant and digital insurance advocate. He can be reached on: riskswisepro@gmail.com and +234-903-596-8732 (text only).

This type of insurance policy, specifically refers to the insurance of inventory items that have been purchased by the buyer and shipped by the seller; however the goods are on their way and are yet to reach the intended purchaser. The ownership of the goods depends on the terms of sale. 

In the case of F.O.B. Destination, the seller is the owner of the goods in transit and is liable for the shipment, for the transportation and the consequent insurances. In F.O.B. Selling Point, the buyer is the owner of the in-transit inventory and consequently responsible for the shipment, for the transportation and the consequent insurances. Goods will be in transit, through any of the following: by shipment; by road transportation; by air transportation; and by rail transportation. However, the most common forms are by shipment and by road transportation. The critical essence of goods in transit is to provide insurance cover against the risks of theft, loss, damages, fire, vandalisation, overturning of the vessel/transportation vessel with its consequential losses, collision of the vessel/transportation vehicle with its consequential losses, risks of loading and off-loading, accidental damages, etc. 

Upon payment of a broker negotiated extra premium, a goods-in-transit inland road transportation will be extended to cover the risks emanating from strike/riot/civil commotion. It is the simplest and the most convenient risk management template to cover inland transit. 

The types of goods in transit insurance policy are as follows: Single transit policy; Specific voyage policy; Open policy cover/floating policy cover; Annual turn over policy; Goods in transit (carrier’s) cover; Goods in transit own vehicle cover; Goods in transit multiple vehicles cover, etc. 

Prerequisites: The value of the goods. This will be the sum insured. It is important to determine from the onset, whether this value/sum insured, will be enough to replace the goods on an old for new basis (replacement at the current market value) or by way of an indemnity policy, in which the depreciation of the value of the goods, will be reflected in any claim settlement. Thus, it is important to insure for the right value, to avert under insurance and the consequent application of the law of average in the event of a CLAIM. 

Other prerequisites are the manifest and invoice that will both detail the goods to be insured; the charter party agreement between the haulier and the owner of the goods is important in a road transit insurance policy. Same for the Customs clearance papers, etc. 

Risk improvement measures: In inland transit, the risk improvement measures, include but not limited to – not leaving the vehicle unattended; ensuring that the vehicle is mechanically fit.

Provision of functional fire extinguishers: Provision of adequate tarpaulin covers; traceable drivers and attendants, the truck has roadworthy tyres and spare tyres, the truck has visible C-cautions, etc. On the other hand, the haulier does not bear responsibility for damage to the goods, arising from inadequate packing, substandard goods, goods in torn cartons, etc. 

Claim prerequisites: Prompt notification to your insurance broker; submission of original invoices; submission of manifests; submission of Bills of Lading; submission of Risk Survey Report; submission of the shipping details; submission of consignment notes/delivery notes; submission of the correspondences with the carrier(s) in shipment transit; submission of  the completed/signed claim form; submission of valid documents of the road transit vehicle (in road transit).

Exceptions to scope of insurance cover: Wear and tear; depreciation; deterioration; inherent vice; defect; rust; oxidation, etc, except as a direct result of fire, theft, accident, etc, during the course of conveyance. 

The following are equally exceptions: Theft of good conveyed in an open top or open side vehicle; theft whilst the vehicle is left unattended to; wilful premeditated misconduct of the insured; theft on the part of the insured’s staff/haulier’s staff; disappearance; unexplained inventory shortage; contraband goods; confiscation of goods by law enforcement authorities; conveyance of explosives/ammunitions; losses arising from terrorism/insurgency/banditry, war; losses arising from abandonment of the goods. 

Declaration clause: The goods in transit insurance policy is a declaration policy. Thus, at the end of the insurance year of 12 calendar months, the total consignment conveyed will be declared. The insurance calculations will be diligently done to ascertain if there was an under conveyance or over conveyance. If there is an under conveyance, there will be payment of a refund premium. On the other hand, if there is an over-conveyance, an additional premium will be paid. It is the duty of your insurance broker to diligently sort this out, either way. 

Summary: The best template to procure an insurance cover is through a professional experienced insurance broker because of the core technicalities in insurance and risk management. Going further, the professional fee of the insurance broker is embedded in the premium paid by the client.

Lastly, in the event of a genuine claim, your insurance broker will be there for you. Insurance firms even bend over backwards to pay a claim on ex-gratia, taking into cognizance the pedigree of an insurance broker.