What is land transportation insurance?

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جهان ترابر ابریشم

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What is land transportation insurance and what role does it play in trade? International land transportation insurance is a type of cargo insurance designed to cover damages caused by accidents and risks that may arise during the transportation of goods. This insurance is essential for compensating potential damages that occur during the transfer of goods via road or rail. For example, if goods are damaged due to an accident, fire, or theft, land transportation insurance can cover the incurred damage and provide financial security to the owners of the goods.

Since ancient times, international transportation of goods has played a key role in the economic development of societies. However, various risks have always existed on road and rail routes, making it necessary for cargo owners to use relevant transportation insurance. These insurances are specifically designed to protect investments and reduce risks associated with accidents.

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Special Insurance in Land Transportation

Land transportation insurance is divided into several subcategories, each designed based on the type of vehicle and the transport route:

Road Freight Insurance: This type of insurance is designed for international road transportation of goods carried by trucks, vans, or other road vehicles. Risks such as accidents, theft, or fire that may occur on the roads are covered by this insurance.
Rail Transport Insurance: This insurance is specifically for goods transported by train. Although rail transportation is considered one of the safest methods due to less traffic and high speed, there are still risks such as train breakdowns, fire, or damage to goods, which this rail insurance covers.

Types of Land Transportation Insurance

The main difference between these two types of insurance lies in their geographic coverage. Domestic insurance is valid only within the borders of a single country, whereas international insurance covers routes outside the country and involves more complex legal settings and coverage.

Land transportation insurance is divided into two main categories:

Domestic Transport Insurance: This insurance covers damages that may occur during the transportation of goods within a country, such as goods transported on intercity or interprovincial routes.
International Transport Insurance: This type of insurance applies to goods transported internationally. For example, if goods are exported or imported from one country to another, international transportation insurance can cover potential damages.

Covered Risks in Land Transportation Insurance

One of the advantages of land transportation insurance is its wide coverage of various risks. These risks include:

Road Accidents: Traffic accidents are one of the most common causes of damage to goods in land transportation. Land transportation insurance typically covers these incidents.
Fire: If goods are damaged by fire, the insurance can cover the costs of compensating for these losses.
Theft: Theft of goods during transportation is another common risk. Land transport insurance often covers this risk as well.
Natural Hazards: Some natural events, such as floods, earthquakes, or storms, may cause damage to goods, and such risks are generally covered by insurance.
Exclusions: Insurances typically exclude certain specific risks. For example, damages caused by negligence or intentional errors on the part of the insured may not be covered.

Factors Affecting the Price of Land Transportation Insurance

The price of land transportation insurance depends on several factors, including:

Value of Goods: The higher the value of the goods being transported, the higher the cost of insurance.
Transport Route: Routes with higher risks, such as those prone to theft or accidents, will have higher insurance premiums.
Type of Vehicle: The type of vehicle used for transporting goods also affects the insurance cost. For example, insurance for heavy vehicles like trucks may be more expensive than for light vehicles such as vans. Rail transport also has its own specific pricing.

Role of Insurance in Risk Management

Land transportation insurance helps reduce the financial risks associated with the transportation of goods, ensuring that both cargo owners and transport companies are less financially affected in the face of potential incidents and hazards. This type of insurance is especially important in international transport, where the value of goods is high and the transportation routes are long and risky. In fact, transportation insurance serves as a risk management tool, freeing cargo owners from concerns about financial losses due to unforeseen accidents. By choosing a reliable company like Jahan Tarabar, you can carry out your international shipments with peace of mind.

Concept of “Loss of Profit” in Land Transport Insurance

One important concept in insurance, particularly in land transport insurance, is “loss of profit” (عدم النفع). This refers to the loss of potential profit or benefit that arises due to an incident. When goods are damaged or delayed in transit, besides the direct physical damage to the goods, the owners may lose the expected profits due to late delivery or inability to fulfill commercial obligations. This type of loss, which is referred to as loss of profit, can sometimes exceed the physical damage to the goods themselves.

Difference Between Physical Damage and Loss of Profit

Physical damage refers to harm or destruction of goods due to a physical incident, while loss of profit involves the financial damage caused by goods not reaching their destination on time or delays in delivery. For instance, a company may order a large shipment of raw materials for its production. If these materials don’t arrive on time, the company cannot produce its products and therefore loses the expected profits from sales.

Insurance Coverage for Loss of Profit in Land Transport

Some land transport insurance policies specifically include coverage for loss of profit. This coverage allows cargo owners to recover part of their losses in case of incidents that lead to the loss of business profits or expected revenue. However, this type of coverage is often optional and must be purchased separately.

Limitations and Specific Conditions for Loss of Profit Insurance

Loss of profit insurance typically comes with limitations. Insurance companies provide this coverage under specific conditions, which must be clearly outlined in the insurance contract. For example, the insured party must accurately state the expected benefits and prove that the loss was caused by unforeseeable incidents. Additionally, some insurers may require that physical damage to the goods also occur for loss of profit coverage to apply—meaning delays without physical damage might not be covered.

Example of Loss of Profit Coverage in Land Transport

To clarify, let’s assume a manufacturing plant purchases a shipment of raw materials worth 100 million IRR, which must be delivered within a specified timeframe. If an accident during transport causes a delay, and the factory cannot produce its products due to the lack of raw materials, the loss of profit from this delay could be significantly higher than the physical damage to the goods. In such cases, loss of profit insurance can compensate for this loss.

Difference Between Loss of Profit Insurance and Cargo Insurance

The main difference between loss of profit insurance and cargo insurance lies in the types of damages they cover. Cargo insurance primarily focuses on covering physical damage to goods, while loss of profit insurance is concerned with compensating financial losses resulting from lost business opportunities and expected profits. While cargo insurance is critical for physical goods being transported, loss of profit insurance is more important for companies relying on timely deliveries.

Methods of Damage Assessment and Compensation in Land Transport Insurance

The damage assessment process in land transport insurance is one of the most crucial steps following an incident. Insurance companies must carefully assess the extent of the damage and then proceed to compensate for it. The methods of assessment include:

Assessing Physical Damage to Goods: After an incident, the insurance adjuster inspects the damaged goods and estimates the extent of the damage.
Assessing Loss of Profit: If the insurance policy includes coverage for loss of profit, the insurance company also calculates the financial losses resulting from delays or failure to deliver the goods.
Compensation Payment: After completing the assessment, the insurance company compensates the loss according to the terms of the contract and its obligations.

Documents Required for Land Transport Insurance Claims

To claim land transport insurance, the policyholder must provide the insurance company with certain documents. These typically include:

Invoice of the Goods: To verify the value of the goods.
Transport Contract: To prove the type and conditions of the transport.
Incident-related Documents: Police reports or other official documents to verify the occurrence of the incident.
Claim Request: Forms that the policyholder needs to complete to initiate the claim.

These documents help the insurance company properly assess and compensate for the damage.

International Coverage of Land Transport Insurance

In addition to domestic coverage, land transport insurance can also be applied to goods transported internationally. Given that international trade requires coordination with the insurance laws and regulations of various countries, international insurance coverage ensures that cargo owners receive financial support in case of any incidents or problems anywhere in the world.

Challenges and Issues in Land Transport Insurance

Despite the many benefits of land transport insurance, there are certain challenges and issues that policyholders may face:

Delay in Damage Payments: Sometimes insurance companies may not make compensation payments on time, which can cause difficulties for cargo owners.
Lack of Awareness Among Policyholders: Many cargo owners are not fully aware of the specific terms and conditions of their insurance policies and may face problems when an incident occurs.

Optimizing Land Transport Insurance

To address the challenges and issues in land transport insurance, solutions such as increasing policyholders’ awareness, improving damage assessment and compensation processes, and providing more comprehensive coverage can be effective. Educating policyholders about their rights and obligations, as well as optimizing insurance contracts, can lead to better quality insurance services and higher customer satisfaction.

Conclusion

Land transport insurance is one of the most important risk management tools in trade and goods transportation. It helps compensate for damages caused by accidents and hazards, providing cargo owners with peace of mind. Furthermore, the concept of “loss of profit,” which is covered by some transport insurance policies, can be crucial for companies dependent on timely delivery. By choosing appropriate insurance policies and understanding their terms, cargo owners can protect themselves from financial and commercial losses and confidently engage in their business activities.