All you need to know about Cargo Insurance

Although it may seem obvious, it is shocking to see how many customers still do not take the right Cargo Insurance to cover their cargo comprehensively..

I don’t think this lack of proper insurance cover is intentional, but may be due to ignorance or lack of knowledge on the part of the client as far as Cargo Insurance goes..

This guest post from Alexander Robertson aims to educate everyone on what is Cargo Insurance and what steps are involved..

What is Cargo Insurance ? 

Any movement of cargo from one location to another involves some form of risk, be it the risk of damage, pilferage, theft of entire packages or non-delivery of the whole shipment.

Marine insurance is the oldest form of insurance in the world with its roots going back to the 9th century BC.  This was the start of what has developed into what we today know as general average.

The first actual marine policy goes back to 1347 in Genova.

Image for Cargo InsuranceWhen it comes to the placing of any insurance it is necessary to have an insurable interest in the cargo.  It is not necessary to have the insurable interest when placing the insurance plus it is possible to place the insurance after the risk has started provided there is no known loss at the time of placing the insurance.


Know the cargo

It is imperative to know the properties of the cargo to be insured including the manner in which it is to be packed.  Ask “what can go wrong with this cargo?”

Packing is vital as it is the packing which protects the cargo during the voyage.  Is the packaging the normal packaging for that cargo for the anticipated voyage?

Ensure that the packages are marked to enable it to be identified.  This is very important for cargo being sent via airfreight or groupage/LCL cargo.  If the cargo is a Branded item, do not have the brand name on the packages as that will just be an invitation for theft.


Know the voyage

This involves more than just to know from which port to which port the cargo is to be moved.  What climate conditions can be expected to have an influence on the condition of the cargo?  Are there any political situations which can affect the safe delivery and/or payment for the cargo?  Does the voyage entail sailing in close proximity to any piracy hotspots?


Cargo clauses

When it comes to the actual insurance of the cargo, there are for general cargo three different levels of insurance which can be chosen.

The clauses are published by the Lloyd’s Market Association (LMA) and International Underwriting Association of London (IUA).

There are also clauses specific for various trades, for example frozen meat, frozen produce, timber, coal, oil to mention a few.

Airfreight has its own clauses, the Institute Cargo Clauses Air (excluding sendings by post).

The main clauses for all other modes of transport are the A, B and C clauses.  We will look at them in reverse order.


C Clauses – Risks covered

1.1          loss of or damage to the subject-matter insured reasonably attributable to

1.1.1      fire or explosion

1.1.2      vessel or craft being stranded grounded sunk or capsized

1.1.3      overturning or derailment of land conveyance

1.1.4      collision or contact of vessel craft or conveyance with any external object other than water

1.1.5      discharge of cargo at a port of distress

1.2          loss of or damage to the subject-matter insured caused by

1.2.1      general average sacrifice

1.2.2      jettison


Image for cover all risksB Clauses – Risks covered

All the above plus:

1.2          loss of or damage to the subject-matter insured caused by

1.2.1      general average sacrifice

1.2.2      jettison or washing overboard

1.2.3      entry of sea lake or river water into vessel craft hold conveyance container or place of storage

1.3          total loss of any package lost overboard or dropped whilst loading on to, or unloading from, vessel or craft.


A Clauses – Risks covered

All risks are covered.

Please do remember that “All risks” are not “All Risks” in that there has to have been a happening.  Something has to have happened which is NOT EXPECTED.

All the clauses covers general average plus “Both to Blame” collisions.

They also have exclusions which are clearly spelt out in clauses 4, 5, 6 and 7 in the clauses.

Only the A Clauses covers piracy.


Types of policies

When insurance is to be considered, they are two basic types of cargo policies, a facultative (once off policy) and an open policy, always open until cancelled.  It is only a facultative policy which is considered to be a valued policy.

All others have what is known as a basis of valuation which sets out how the cargo is to be valued in order to calculate the premium plus how to calculate the value of a loss against a policy.  This value can be “delivered at final destination plus a percentage”.

Remember that a policy taken out by a seller under Incoterms ® 2010 rules CIF or CIP covers the buyer’s risk and not the seller’s risk.  The Incoterms ® 2010 rules state that the policy shall be valued at a minimum of CIF/CIP value plus 10% under C Clauses.

Taking into consideration that the whole idea of insurance is to put the insured back into a position had the loss not occurred, this 10% will not cover costs of duties, costs of customs clearing and delivery by any means of transport to the place of final receipt of the cargo, it is permissible to have a higher percentage mark-up.  The rules also stipulates that the Institute Cargo Clauses 2009 version be used, or the equivalent.

Besides having a higher percentage mark-up, it is also permissible for the buyer to request better cover than that provided under C Clauses.

Do not forget that war and strikes, riots and civil commotions are excluded in terms of the above clauses but can be brought in by taking out cover for those risks.

Below is a form which gives some ideas as to what questions to ask when placing cargo insurance.




(Including subsidiaries/affiliates)


LIMITS: CONVEYENCE:                                   LOCATION   :


(Description – also second hand? Hazardous?)



(e.g. Exports – C.I.F. + 10%; Imports – Delivered Cost + 10%)


(Cases/cartons/bags etc.)


(Fully enclosed/open topped etc. FCL/GROUPAGE/LCL)



(Charters etc./Air Freight)

FROM                            TO                               VIA (Transhipment)



(e.g. I.C.C. (A) (WSRCC)


(Air Freight Replacement, Rust oxidation and discoloration, etc. etc.)



Premiums/Claims:                                                           Paid & O/S


e.g. Present Insurers:

       Formerly C.I.F./C.I.P.?




Finally, remember that should you appoint an insurance broker, always make use of one who knows your product, knowledgeable in marine insurance plus knowledgeable in current affairs including geography which includes best routing of your cargo.

If you are a first time importer or new to importing, there is a very useful Beginner’s Guide to Importing which you can download here.. This guide also speaks about some of the safeguards that a new importer must take..

All you need to do is update your email address in the above form, and you will receive an email with the link to download the book..

*** End of Article ***

11 thoughts on “All you need to know about Cargo Insurance”

  1. this insurance is for Cargo Owner, Buyer or Seller,
    what’s From a Freight Forwarder/NVOCC side ? was it a must to ensure the Carried Cargo, to our knowledge the big Container Shipping Lines ensure their Vessels/Containers on a monthly Basis.

    I would like to know which insurance type/Insurance Scenarion is suitable for FFW or NVOCC or 3PL.

    Thank you beforehand.

  2. Hi, Classification certicate – Is it mandatory for a vessel is less that 1000 grt (331) and made of wood ?? Pls advice.
    Can this be a reason for denial of claim for a total loss(sunk) case???

  3. What does this statement mean: “Destination is “Held Covered” for WSRCC. Please apply to R&S before shipment commences.”

  4. Thanks for the info, i came here while searching for an answer which i didn’t find.

    I have goods insured with Class A by sea freight, while the container with the shipping line, some damages happened on the container in a way that we couldn’t open it till we have paid some money to specialized company in addition to some extra charges here and there. There was no damage on the goods but we can’t get them out till we pay all these charges. The insurance company says this is not covered in the insurance poilicy! The shipping line didn’t cover too. Who’s responsibility is this and why? Any help would be appreciated on this. It is a chance to learn more on such rare case.

    • Good day Amer, thank you for your question. It appears from your question that the damages relates to that of the shipping container. This type of damage is not covered by the cargo policy, only t he actual cargo is covered. You have not mentioned the cause of the damages which would help in giving a full reply. There are instances when damages to the packing is covered when it is necessary to save the cargo in question. What is the commodity as to why you require a specialised company to open the “container”?

      We would be able to assist you more fully should we know all the details including a breakdown of the charges to which you are referring. Seeing the full claim documentation would assist in giving a full reply. If you wish send more information and documents to my email address

  5. My experience in insurance is that you are not always covered 100%. There always seems to be at least one risk that insurers will not insure, for example, shipping delay and short shipment (delay), which I’m told is an uninsurable business risk. It would be useful if some locally based insurers (South African) could add their comments…

  6. Hello, thanks a lot for your great blog.

    No I have one question regarding protection. I hope you will help me with it.

    Suppose I am an Importer & I have done deal in LC at sight & incoterm is CIF. Now as per LC the Supplier (Exporter) will receive money against documents. As an Importer I will receive goods later. Now I found that the goods are received in damaged condition. Exporter has got clean B/L so he is saved. Now who will pay me if I have got cover C as per CIF ??

    • Hi Kishan,

      As it is a CIF trade, your exporter is responsible to arrange the insurance at his cost to cover the voyage from port of loading to port of discharge (at minimium). The ownership of cargo under CIF transfers when the cargo is aboard ship, which means that the cargo is at your risks after that. So, you may request your exporter to provide you the insurance certificate to lodge a claim to Exporter’s cargo insurer. Hope it finds.

    • Being CIF, the risk is covered only till discharge port, but as an importer, I will come to know about the damage of goods only once I received the shipment in my premise, would it still be the responsibility of the exporter to cover the loss through his/her insurance. Also how will it be decided that the damage was in transit before reaching to the discharge port or after that.

  7. Very useful article. Please share some of your views on interlinkages between shipping, bill of lading and LC.


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