I met recently with a client who operates a small water taxi service. I noticed several crates in the bed of his truck and learned that he was transporting them to one of our local islands.

While this seemed like an innocent risk to the insured, there was one glaring problem: His policy excluded coverage for cargo.

While marine policies have limited coverage for passengers’ personal effects, there is often an exclusion attached for cargo. This can be added by an endorsement with a sublimit of coverage, with the premium based on the amount of coverage. Be sure to understand the value of the cargo you are transporting, because your insurance policy will only provide the limits you have paid for. You will also have a separate deductible for cargo claims. A good practice is to have a freight contract with a customer which determines the value of the items to be shipped. This can help avoid any surprises in case of a loss.

Take a look at how the cargo has been packed. We all know things can get rough and wet on the water. You should have an established set of guidelines regarding packaging and you should reserve the right to refuse the right to ship an improperly packaged item. You can’t control the weather and you don’t want to have to pay for someone else’s poor work.

As with all insurance, the cargo endorsement will come with exclusions. Be sure to review the exclusions with your agent to make sure everyone is on the same page. Negotiations with an underwriter can often result in more favorable coverage.

Here in Maine, small cargo vessels that service local island communities are a lifeblood to those islands. Often the families that operate them have been doing so for many generations. The same is true for many coastal and river cargo operations throughout the U.S.

As the nature of your business changes and develops, so too should your approach to risk management. Talk to your agent and see if your policy needs to be updated.

Chris Richmond is a licensed mariner and marine insurance agent with Allen Insurance and Financial. He can be reached at 800-439-4311 or [email protected]

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