What exactly is Goods in Transit Insurance

Goods in transit insurance

Goods in Transit Insurance – what is it?

Goods in transit insurance (GIT) covers the goods of a business against loss or damage while they are in transit from one place to another or are being stored during a journey. A business can obtain this insurance cover for goods being distributed in its own vehicle, a hired vehicle or by a third-party carrier. The cover can include both domestic and overseas transit.

Policies often specify the means of physical transport to be used. This may include the postal service.

If a business is shipping its goods by sea then it may need to take out marine insurance. This insurance also protects the transit of cargo over land at each end of the voyage.

What the insurance usually covers

A goods-in-transit policy will protect a business from:

  • Theft (while in transit)
  • Damage caused by accidents during transit
  • Damage caused during transit
  • Loss (while in transit)
  • The consequences of any untoward delay (Dependent on the policy)

As with other forms of insurance, the business managers and their insurance provider will need to agree on the value of the goods to be in transit. If the goods are new, or produced against standard costs, then this shouldn’t be too much of a problem. Remember, Goods in Transit Insurance does not protect a business if the goods it receives are found to have been despatched as inferior, below standard, or damaged through inappropriate packaging. A business is insured against theft, damage or loss, not because there is a problem with quality control.

Two types of GIT insurance cover

Many business managers assume that when they make a Goods-in-Transit Insurance claim the business is compensated for the cost of replacing stolen, damaged or lost items with the new equivalents.

While this might be the case, it isn’t always the case. Business managers are often disappointed to find that the terms of their insurance cover mean they only receive a pay out after the age of goods and wear and tear have been taken into account.

There are two types of cover:

  • New-for-old – goods are replaced at their current market value
  • Indemnity cover – the insurance provider will take into account general depreciation.

New-for-old insurance

The better Goods-in-Transit Insurance policies provide the ‘new for old’ cover.

‘New for old’ ensures that when a business is claiming on a good (although not necessarily all goods in the transit) it will be compensated sufficiently to exchange it for the exact same, new version. It that is no longer available, the latest equivalent. Failing that, items are replaced at their current market value.

Most managers generally prefer new-for-old, for the obvious reason that it brings peace of mind. A business may pay a little more, but receiving the new or exact equivalent, for a good is preferable to most managers because it won’t leave the business potentially out of pocket when it needs to get a replacement.

There are usually only a few goods that new-for-old policies won’t include compensation for. These tend to be goods that are less robust and easily ruined or lost. Policies vary in this regard and so it is wise to always check with your insurance provider, or ask your insurance broker for assistance.

Indemnity cover

The alternative is to opt for Indemnity insurance. This is sometimes called, ‘wear and tear’ cover.

Indemnity cover is generally the cheaper option as the insurer will only cover the good in the condition it was in. So if a business was attempting to replace a good which cost it £10,000 five years ago, now worth £3,000,  but if brought new would cost £12,000, it might only receive compensation for one worth £3,000.

Likewise, if the transit damaged a five year good, the business would receive compensation for the same or a similar good which is five years old.

In other words, wear and tear is taken into consideration.

The premiums on insurance policies that offer indemnity cover (wear and tear cover) are generally less than with a policy based on new-for-old. It would be wise to carry out a cost-benefit valuation of the insurance cover.

Make sure you know which type of cover you are buying

Be careful to check which type of cover the insurance company is proposing (obviously the new-for-old is a far better option), but it can be expensive. If your business does purchase a new-for-old policy, make sure to value its goods at their replacement value when obtaining the insurance cover, not at their actual value.

Find out more from your Insurance Broker

Speak with a representative from Invicta Business on 0330 0450032.  Invicta Business is an independent insurance broker who can help you find the best commercial insurance policy for your company needs.  Invicta Business is Authorised and regulated by the Financial Conduct Authority.

looking for Something else? We also provide insurance services for commercial businesses include:  tradesmen insurance, office insurance, shop and retail insurance, commercial motor insurance, insurance cover for restaurants and pubs, hotel and guesthouse cover, and more. Give our friendly Kent team today to find an insurance that suits your business.


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