WtraLab – Global Trade Lab

Every international shipment faces risks — from rough seas and handling damage to theft and total loss. Cargo insurance protects your business from financial losses when things go wrong during transit.

What is Cargo Insurance? Cargo insurance (also called marine cargo insurance) is a type of insurance that covers physical loss or damage to goods while they are being transported by sea, air, road, or rail. It is one of the most important risk management tools in international trade.

Why is Cargo Insurance Important? Without cargo insurance, you bear the full financial risk if your goods are lost or damaged. Carrier liability is extremely limited under international conventions. For example, under the Hague-Visby Rules, a shipping line’s liability is limited to approximately $2.50 per kilogram or $500 per package — far less than the actual value of most shipments.

Types of Cargo Insurance Coverage

All Risks coverage is the most comprehensive type of cargo insurance. It covers all physical loss or damage to goods from any external cause, subject to certain exclusions such as inherent vice, delay, and war.

Free from Particular Average (FPA) is a more limited coverage that only covers total loss or damage caused by major incidents such as sinking, stranding, or collision.

With Average (WA) coverage provides broader protection than FPA and covers partial losses caused by sea perils.

What Does Cargo Insurance Typically Exclude? Most cargo insurance policies exclude losses caused by poor packaging, inherent vice or natural deterioration of goods, delay even if caused by an insured peril, war and strikes unless specifically covered, and willful misconduct of the insured.

How is Cargo Insurance Premium Calculated? The premium is typically calculated as a percentage of the CIF value of the goods. Factors that affect the premium include the nature of the goods, mode of transport, origin and destination, packaging quality, and claims history of the insured.

How to Make a Cargo Insurance Claim If your goods are lost or damaged, notify your insurer immediately, document all damage with photographs, obtain a survey report from an independent cargo surveyor, preserve all shipping documents including the Bill of Lading and Commercial Invoice, and file your claim within the time limit specified in your policy.

Conclusion Cargo insurance is not just an optional extra — it is an essential part of responsible international trade. Always insure your shipments for their full CIF value and review your policy carefully to understand what is and is not covered.