Cargo Insurance: What is it and why do I need it?

Cargo insurance help as a group of human head shaped container cargo drowning in the ocean with a life preserver coming to the rescue as an export and import logistics management symbol with 3D illustration elements.
The shipping industry should consider managing the costs of cargo insurance. This requires a thorough understanding of how freight insurance works. Specifically, companies must be careful with the insurance packages they select to ensure they have sufficient coverage in the event that shipping risks materialize. Otherwise, full liability may arise in cases of accidents and losses. As a starting point, it is important to properly understand cargo insurance.

Conceptualization of cargo insurance

The basic definition of cargo insurance is a set of risks to cover individual liabilities when an incident occurs during cargo management that subsequently leads to losses. For a relatively small monthly contribution, insurance plan members can lower their potentially larger liability bill. In some cases, cargo insurance is mandatory, but the level of coverage can vary significantly. For example, most carriers typically offer basic insurance, but it is limited and virtually useless in the most serious incidents.

For most companies, the minimum carrier liability insurance coverage is not enough. Anything from vehicle accidents to natural disasters can easily cause claims to exceed the minimum coverage. Similarly, an act of war could interrupt travel and cause cargo loss, meaning the uninsured must bear the costs out of their own budgets. It is recommended that all senders update their coverage accordingly.

Covered risks include theft, damage and loss in transit. The best coverage ensures that the load is covered even during storage until it is delivered to the end customer on the chain. Despite its benefits, there are limitations to cargo insurance.

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Cargo insurance limitations

In the US there is the Carmack Amendment which indicates that trucks crossing state lines are not fully covered against all losses and could be held liable for any damage to goods. No proof of negligence is required. That is why it is important to have reliable coverage. However, the lack of a single comprehensive package means that carriers must shop around and make decisions about the relative cost and coverage of each proposed policy.

Insurance is only valuable if there is a realistic prospect that risks will be covered when a claim is made. Some policies have complex exclusion clauses that virtually imply a lack of coverage. Even having a certificate of insurance cannot always lead to a successful claim, as the provider may raise questions that ultimately cancel the claim.

Many exclusions can be written into law to protect the shipper, the carrier, and even the end customer. For example, the package can only cover certain equipment in very specific circumstances. Other packages are limited to certain terminals. Covered events could also be restricted from the beginning. There are policies that will only be activated if the service is performed in a certain way according to certain standards.

Understanding and documenting the value of your cargo is the first step in ensuring you get the best out of your cargo insurance package. Having the proper documentation is very important when assessing loss and damage. Otherwise, lengthy disputes could prevent the claim from being clarified. It is advisable to hire a competent insurance agent or attorney to read the fine print on your policy. One of your key tasks will be to understand the policy under which you are covered.

Types of cargo insurance

Over time, various types of cargo insurance have emerged on the market. Some policies are national, while others are regional and international. When jurisdictions have crossed, it is essential to have adequate representation in the event of a dispute. The different categories are listed below. One of the categories relates to the geographic scope of the policy, such as national versus international.

Land cargo insurance

These policies are for ground transportation, including small utility vehicles and trucks. The risks that are included can include collision, theft and related risks. Policies are often linked within national borders.

Marine cargo insurance

This coverage includes air and sea transportation. Some of the critical coverage points include damages that occur during loading and unloading, as well as weather contingencies. Policy can also address piracy, a major problem on certain routes. In its presentation, marine cargo insurance is decidedly international. It can include several subcategories that are explored below.

1. Freight policies with open coverage

These policies refer to various shipments, renewable or permanent. The renewal version is for a specific value and will need to be renewed after it expires. The product is used for individual trips / trips. If there are many shipments in a specific period, the temporary status can become permanent.

2. Specific cargo policies

These policies arise when a company approaches a broker or insurer to cover a specific shipment. They are included in travel policies because they only deal with shipments and not freight.

3. Contingency insurance policy

These policies are built in situations where the customer is liable for damage or loss. The challenge is that the goods can be damaged during transit and the customer refuses to accept them. There are situations where the client does not obtain adequate insurance and avoids liability. A legal recourse may be required to compel the customer to pay for the damages. Contingency policies cover them in case they lose and can also cover legal costs.

Cargo insurance benefits

Cargo insurance is highly recommended for the benefits it brings to industry, companies and individuals. The right policies can cover goods in transit regardless of mode, including courier, mail, rail, road, air, and water. There are several levels of coverage detailed below.

All risk coverage

All-risk cargo insurance is as comprehensive as it is comprehensive. Covers most loss or damage caused by external factors. Despite its name, certain events or instances can be excluded. Generally, the policy will address damage arising from infestations, improper packaging, neglect, employee dishonesty, and refusal from customs.

Free of particular average coverage

This policy excludes partial hull or cargo losses due to sinking, stranding, collisions or burns. Also, senders are not required to cover minor losses under this policy calculated by a predetermined percentage. The responsibility of the sender will only take effect when the damages are significant. Specific hazards may be included, such as inclement weather, collision, derailment, earthquake, subsidence, theft, and non-delivery.

Overall average coverage

This policy is a minimum requirement for ocean freight. However, it only covers partial losses. The rest of the costs are passed on to the agent, the sender or the recipient.

Warehouse-to-warehouse coverage

This policy is necessary to cover the period of unloading a ship until delivery to the customer’s warehouse. It is important to note that insurers generally only offset the policy owner’s burden.


Cargo insurance bundles the risks of shipping, so policyholders must pay a relatively small premium to access the potential benefits. Given the volume and value of shipments, cargo insurance is essential. Given the diversity of products on the market, it is important to evaluate the scope and appropriateness of the proposed coverage before purchasing a plan.

Vivian loves working here. He has been with the company since its inception, more than two decades ago. When you don’t give 110% to help your clients succeed in business, you may find Vivian spending time outside with her family or relaxing on the beach with a good book.