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All you need to know about Cargo Insurance and why you need it

cargo insurance - shipping and freight resourceMarine 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..

When 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..

Why do I need Cargo Insurance..??

Well, short answer – ANYTHING can go wrong with your shipment enroute to its destination – maritime disasters like containers falling overboard, ships breaking up, ships running aground, containers and ships catching fire and many other cases..

If your cargo is not insured, you are not going to be compensated for the same and you could lose your business and livelihood. So think again..

There are different types of Cargo Insurance and types of policies available to cover your cargo depending on your requirements..

Here are some of the points that you need to consider before taking on Cargo Insurance..


1) 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? Is the packaging sufficient to avoid cargo damage?

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.


2) 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?


3) 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.


3.1 C Clauses – Risks covered

  1. loss of or damage to the subject-matter insured reasonably attributable to
  2. fire or explosion
  3. vessel or craft being stranded grounded sunk or capsized
  4. overturning or derailment of land conveyance
  5. collision or contact of vessel craft or conveyance with any external object other than water
  6. discharge of cargo at a port of distress
  7. loss of or damage to the subject-matter insured caused by
  8. general average sacrifice
  9. jettison

3.2 B Clauses – Risks covered

All the above plus:

  1. loss of or damage to the subject-matter insured caused by
  2. general average sacrifice
  3. jettison or washing overboard
  4. entry of sea lake or river water into vessel craft hold conveyance container or place of storage
  5. total loss of any package lost overboard or dropped whilst loading on to, or unloading from, vessel or craft.

3.3 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.


4) 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® 2020 rules CIF or CIP covers the buyer’s risk and not the seller’s risk.

The Incoterms® 2020 rules state that the policy shall be valued at a minimum of CIF value plus 10% under C Clauses.  Under CIP the value shall be the contract value plus 10% under A Clauses.  The buyer can request additional cover, for example war and strikes cover.

Although the seller takes out the insurance, the seller will include the premium in the selling price.  If the clauses mentioned are not in use by the insurer in the country of the seller, the equivalent clauses must be used.  The insurance is to be in the currency of the sales contract plus the buyer must be able to claim directly on the insurers.

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 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.

Ensure that the policy covers the complete voyage to ensure that should there be any claim, there is no argument from the insurer  as to where the loss occurred and thus stating that the loss did not occur during the currency of the policy.

The Incoterms® 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.

Full Title Of Insured : (Including subsidiaries/affiliates)
Attachment Date :
Limits Conveyance :
Location :
Subject Matter : (Description – also second hand? Hazardous?)
Estimated Values :
Basis Of Valuation : (e.g. Exports – C.I.F. + 10%; Imports – Delivered Cost + 10%)
Packing : (Cases/cartons/bags etc.)
Containerised Shipments : (Fully enclosed/open top etc. FCL/GROUPAGE/LCL)
Under Deck/On Deck :
Vessels/Conveyances : (Charters etc./Air Freight)
From :
To :
Via (Transhipment) :
Storage :
Cover Required : (e.g. I.C.C. (A) (WSRCC)
Extensions : (Air Freight Replacement, Rust oxidation and discoloration, etc. etc.)
Deductibles :
Underwriting Statistics : (3 years)
Premiums/Claims : Paid & O/S
General Information :
E.G. Present Insurers :
Formerly C.I.F./C.I.P.? :
Quotation Details :
Administration :
Date :

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.

About the author : robertsonsAlexander Robertson runs Robertson’s Cargo Consultancy is a TETA accredited training provider in South Africa with a combined staff experience of over a 100 years, offering training courses in

  • Logistics
  • Cargo Insurance (endorsed by the Insurance Institute of South Africa)
  • Letter of Credit
  • Incoterms® 2010 (SA ICC accredited)
  • Trade Documentation, among other topics

For further details, Alexander Robertson maybe contacted via email


Article republished after some updates relating to Incoterms® rules

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Alexander Robertson
Alexander Robertson
Alexander Robertson is an industry professional with a rich background in education and training, particularly in the fields of Freight Forwarding and Customs compliance. He is fully accredited with TETA to present the SAQA qualification 59365, a National Certificate at NQF level 3, boasting 130 credits. You can learn more through his site


  1. Hi,

    I am curious to know when the validity insurance policy of sea cargo expires? Is it 15 days or “as agreed”, or perhaps upon offloading in destination port?

  2. Hi, We received our consignment in damaged condition same has been informed to forwarder and insurer. After the joint survey, forwarding agent confirmed that the damages occurred during custom clearance, as normal procedure authority have opened wooden pallet and one of of the item has been broken into pieces based on this forwarding agent and insurer repudiate our claim stated the reason that any damage/ shortage occurred during customs authority custody will not be covered. Please advise who is responsible for this loss how can we get a claim.

  3. Hello,

    Can we do insurance cover under open policy, where we have set FOB shipment terms with buyer but at the shipment we do C& I to include the insurance.

    If accident happens, will insurance company give us claim

    • Claim acceptence by Insurance company on the basis of Incoterms of contaract. If the incoterms is FOB, and you have taken Policy on CIF basis then claim will not be paid as your responsibility ends once the material has been loaded on ship.

  4. I have merchandise safeguarded with Class A via ocean cargo, while the holder with the delivery line, a few harms occurred on the compartment such that we were unable to open it till we have paid some cash to specific organization notwithstanding some additional charges to a great extent. There was no harm on the products except for we can’t get them out till we pay every one of these charges. The insurance agency says this isn’t canvassed in the protection poilicy! The delivery line didn’t cover as well. Who’s obligation is this and why? Any assistance would be acknowledged on this. It is an opportunity to learn more on such uncommon case

  5. 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.

  6. 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???

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

  8. 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

  9. 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…

  10. 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.

    • You are using the wrong Incoterm if the goods are containerized. It should be CIP . . . Read the Incoterms rules. CIF is only for bulk and break bulk cargo.

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


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