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What cargo insurance covers, and why carrier liability is not enough
Cargo insurance is a policy the owner of the goods (or a forwarder on its behalf) buys so that the insured value is paid if the goods are lost or damaged in transit. It is separate from the carrier’s own liability. The ocean line, airline or trucker that moves your goods is liable to you only within the limits set by the law that governs its bill of lading or air waybill, and those limits are fixed per package or per kilogram, not by what the goods are worth.
The table shows the three regimes that apply to a shipment moving to or from the USA. Each lets the shipper declare a higher value in the transport document for an extra charge, but declared-value freight is expensive and the carrier keeps every defence the law gives it. A policy in your own name pays on the loss itself; the insurer then pursues the carrier for whatever the carrier owes.
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| Mode | Regime | Carrier's limit of liability | Notice and time bars |
|---|
| Ocean | Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 30701 note | $500 per package or customary freight unit, unless the shipper declares the nature and value of the goods before shipment and it is inserted in the bill of lading (s. 4(5)). | Written notice of loss at the port of discharge before or at removal; within three days of delivery if the damage is not apparent. Suit within one year of delivery (s. 3(6)). |
| Air | Montreal Convention 1999, Art. 22 | 26 Special Drawing Rights (SDRs) per kilogram since 28 December 2024, up from 22 SDRs, unless a higher value is declared on the air waybill and a supplementary sum paid. | Written complaint within 14 days of receipt for damage and within 21 days for delay (Art. 31). Action within two years of arrival (Art. 35). |
| US trucking | Carmack Amendment, 49 U.S.C. § 14706 | Actual loss or injury to the property, but the carrier may limit its liability to a value the shipper declares or agrees in writing, and most truckers’ bills of lading and tariffs do exactly that. | The carrier may not allow less than nine months to file a claim or less than two years to bring a civil action. |
An SDR is the International Monetary Fund’s unit of account; 26 SDRs was roughly US$35 at the time of the 2024 revision, so a 100 kg air shipment of electronics worth $40,000 is covered by the airline for a few thousand dollars unless it is insured. On the ocean side, what counts as a "package" turns on how the bill of lading describes the cargo, which is why the piece count and packaging on the bill matter.
What a cargo policy adds
- Physical loss or damage: from an external, accidental cause during the insured transit, paid on the agreed insured value rather than a per-package or per-kilogram cap.
- General average and salvage contributions: your share of a general-average adjustment and any salvage charges, which all three Institute Cargo Clauses cover (clause 2).
- Warehouse-to-warehouse transit: cover attaches when the goods are first moved for loading at the origin warehouse and runs through the inland legs, loading and unloading, the main carriage and delivery to the final warehouse (clause 8).
- Both-to-blame collision liability: the cargo owner’s share of a collision liability under the clause of that name in the contract of carriage (clause 3).
- Recovery against the carrier: once the insurer has paid, it takes over your rights against the carrier (subrogation), so the carrier’s limits become the insurer’s problem, not yours.
All-risk versus named-perils cover: Institute Cargo Clauses A, B and C
Most cargo policies written for US importers and exporters use the Institute Cargo Clauses, a standard set of London-market wordings last revised on 1 January 2009. They come in three grades. Clauses (A) are the "all risks" wording: clause 1 covers all risks of loss of or damage to the goods except what clauses 4 to 7 exclude, so the insured only has to show that an accidental loss happened. Clauses (B) and (C) are named-perils wordings: they pay only for loss caused by a peril on their list, and the insured has to show which listed peril caused it.
The practical difference is in the everyday losses. Theft, pilferage, non-delivery, rough handling, breakage, wetting from rain or condensation and container drops in the yard are not on the (B) or (C) lists; under (A) they are covered as accidental losses, subject to the exclusions. Piracy is another: clauses (A) carve piracy out of the war exclusion, while (B) and (C) do not. The table compares the three.
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| Peril | ICC (A) | ICC (B) | ICC (C) |
|---|
| Basis of cover | All risks of loss or damage, except the exclusions | Listed perils only | Shorter list of perils only |
| Fire or explosion; vessel stranded, grounded, sunk or capsized; land conveyance overturned or derailed; collision; discharge at a port of distress | Covered | Covered | Covered |
| General average sacrifice; jettison | Covered | Covered | Covered |
| Earthquake, volcanic eruption or lightning | Covered | Covered | Not covered |
| Washing overboard; entry of sea, lake or river water into the vessel, hold, container or place of storage | Covered | Covered | Not covered |
| Total loss of a package lost overboard or dropped during loading or unloading | Covered | Covered | Not covered |
| Theft, pilferage, non-delivery, breakage, rough handling, rain or condensation damage | Covered as an accidental loss, subject to the exclusions | Not covered | Not covered |
| Piracy | Covered (excepted from the war exclusion) | Excluded | Excluded |
| Deliberate damage by the wrongful act of any person | Covered (no clause 4.7) | Excluded (clause 4.7) | Excluded (clause 4.7) |
What "all risk" does not mean: the exclusions common to A, B and C
All risk is not every risk. Clauses 4 to 7 of every grade exclude loss, damage or expense caused by:
- Wilful misconduct of the insured (4.1).
- Ordinary leakage, loss in weight or volume, or wear and tear of the goods (4.2). Evaporation, settling and the normal shrinkage of a bulk commodity are not insured losses.
- Insufficient or unsuitable packing or preparation to withstand the ordinary incidents of the transit, where the insured or its employees did the packing, or it was done before the cover attached; "packing" expressly includes stowage in a container (4.3). This is the exclusion that defeats more container claims than any other.
- Inherent vice or nature of the goods (4.4): fruit that ripens, steel that rusts in humid air, goods that spoil without any external event.
- Delay even where the delay is caused by an insured peril (4.5). A missed season or a cancelled order is a commercial loss, not a cargo loss.
- Insolvency or financial default of the vessel’s owners or operators where the insured knew, or should have known, that it could stop the voyage (4.6).
- Nuclear weapons or radioactive contamination (4.7 in A, 4.8 in B and C).
- Unseaworthiness or unfitness of the vessel, container or conveyance where the insured is privy to it at the time of loading (5.1). Loading your own goods into a container you know is damaged forfeits the cover.
- War, civil war, capture, seizure, arrest or detainment, derelict mines and weapons (clause 6). Clauses (A) except piracy from this exclusion; (B) and (C) do not.
- Strikes, lock-outs, riots, civil commotion and terrorism (clause 7).
War and strikes cover is bought back for most shipments by adding the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo) to the policy; ask for them by name when the route passes through a listed area.
Warehouse to warehouse, and when the cover stops
The transit clause (clause 8) attaches the insurance when the goods are first moved in the origin warehouse for the purpose of immediate loading, keeps it in force during the ordinary course of transit, and ends it at the earliest of: completion of unloading at the final warehouse named in the policy; unloading at any other warehouse the insured chooses for storage, allocation or distribution; the insured’s election to use a container or vehicle as storage; or the expiry of 60 days after discharge overside from the ocean vessel at the final port. A container that sits at the port for two months under a customs hold, or in your own yard as overflow storage, can run out of cover before it is unpacked.
The insured value
Cargo policies are valued policies: the sum insured is agreed in advance, not assessed after the loss. The customary basis is the CIF value plus ten per cent, that is the commercial invoice value plus freight plus insurance, with a ten per cent uplift intended to cover the buyer’s expected profit and the incidental costs that sit outside the invoice. The IUMI Guide to Marine Cargo Insurance calls CIF + 10% the most popular basis of valuation; it is a convention, not a rule, and a buyer whose margin or landed costs are higher can insure a higher agreed value.
Incoterms 2020 fixes the same convention into the sale contract for two rules. Under CIF the seller must buy at least Institute Cargo Clauses (C), or equivalent, for at least 110 per cent of the contract price; under CIP the seller must buy Institute Cargo Clauses (A). Under every other rule, including FOB and FCA, nobody is obliged to insure, and the buyer carries the risk from the moment it transfers.
General average and why insurance matters for it
General average is the oldest rule in maritime law: when the master deliberately sacrifices part of the ship or cargo, or incurs an extraordinary expense, to save the whole venture from a common peril, every party whose property was saved contributes to the loss in proportion to the value saved. Jettisoning containers to refloat a grounded ship, a salvage contract, port-of-refuge costs and firefighting damage are the classic examples. The contribution is assessed by an average adjuster under the York-Antwerp Rules incorporated in the bill of lading, and it can take years to finalise.
The Ever Given is the case most importers remember. The vessel grounded in the Suez Canal on 23 March 2021 and was refloated on 29 March; the owner then declared general average and appointed adjusters. Cargo was released only against general-average security: for insured cargo, the cargo insurer issued an average guarantee; for uninsured cargo, the owner required a cash deposit before releasing the container and held a lien on the goods until it was paid. FIATA warned at the time that shippers without appropriate cover were vulnerable to losing their cargo altogether if they could not fund the bond.
Every grade of the Institute Cargo Clauses covers general average and salvage charges (clause 2), including the security needed to get the container released, which is the main reason a buyer of a low-value shipment still insures it. Without cover, you fund the security yourself and pay your share of the adjustment when it is finally issued.
How the premium is determined
A cargo premium is a rate applied to the insured value. The rate is set per commodity and per lane, which is why no reputable forwarder publishes a single price for cargo insurance. What moves it:
- The commodity: fragility, susceptibility to water and temperature, attractiveness to thieves (electronics, branded apparel, spirits) and perishability all raise the rate; machinery in crates and bulk raw materials sit at the other end.
- Packing and unitisation: a sealed full container is rated differently from LCL cargo consolidated with other shippers’ goods, breakbulk or open-top loads; export-grade packing is assumed, and its absence is an exclusion, not a rating factor.
- Route, ports and legs: transhipment, inland trucking at either end, ports with a theft or handling record and areas listed for war or piracy risk each add to the exposure; war and strikes add-ons are priced separately.
- Mode: air, ocean and trucking carry different loss patterns, and a door-to-door move insured warehouse to warehouse covers more legs than a port-to-port one.
- Insured value and currency: the sum insured, the valuation basis (invoice plus freight plus the customary ten per cent) and the currency of the policy.
- The clauses chosen: Institute Cargo Clauses (A) cost more than (C), and any special conditions such as a survey warranty for used machinery change the rate.
- Deductible: a higher retention lowers the rate; some commodities carry a compulsory deductible for breakage or shortage.
- Volume and history: an annual open cover for a regular shipper is rated on turnover and past claims; a single-shipment certificate is rated on that shipment alone.
To arrange cover we need the commodity, the commercial invoice value, the Incoterm, the origin and destination, the mode and how the goods are packed. Cover is confirmed before the goods move; it cannot be added after a loss.
How a cargo insurance claim works
Most claims are won or lost at the delivery dock. The sequence below is what the policy and the carrier’s liability regime both expect.
- Inspect before you sign. Check the container seal, the packages and the piece count against the delivery order before the driver leaves. Write every exception on the delivery receipt or proof of delivery: crushed cartons, wet packaging, broken seal, short count. A clean signature is the carrier’s best defence and the insurer’s first question.
- Photograph everything. the seal, the container number, the load as the doors open, the damaged packages in place and the damage itself. Keep the damaged goods and their packing until the surveyor or insurer releases them; do not repair, sell or dispose of anything first.
- Notify the carrier in writing. at once for visible damage, and within the regime’s window for concealed damage: three days after delivery for ocean under COGSA, 14 days after receipt for air under the Montreal Convention (21 days for delay). Clause 16 of the Institute Cargo Clauses makes preserving your rights against carriers a duty of the insured; a missed notice can reduce what the insurer pays.
- Notify Airlift and the insurer. email insurance@airliftusa.com with the house bill or air waybill number, a description of the loss and the photographs. For larger or complex losses the insurer appoints a surveyor to inspect the goods, establish cause and extent, and report; do not wait for the survey to give notice.
- Assemble the claim file. a claim letter on your letterhead stating the amount claimed; the bill of lading or air waybill; the commercial invoice and packing list; the delivery receipt with the exceptions noted; the photographs; the survey report if there is one; your written notice to the carrier and any reply; and repair, salvage or destruction quotes where relevant.
- Adjustment and payment. the insurer adjusts the claim against the policy terms, insured value and deductible, pays the insured, and then pursues the carrier in your place. Any recovery from the carrier belongs to the insurer up to the amount it paid.
Keep the legal clocks in view while the claim runs: COGSA bars a suit against the ocean carrier one year after delivery, the Montreal Convention two years after arrival, and a US trucker must allow at least nine months to file a claim and two years to sue. The policy itself also sets notice requirements; late notice is the commonest reason a valid loss goes unpaid.
How Airlift arranges cargo insurance
Airlift USA is an FMC-licensed NVOCC and freight forwarder (OTI licence 016162), not an insurer. We arrange cargo insurance for the ocean, air and trucking shipments we handle through our insurance partners, on the value you declare, and we confirm the certificate before the goods move. When a loss happens we help you assemble the claim file and submit it, and we chase the carrier for the exceptions and correspondence the insurer needs.
Cover is optional and is quoted with the freight when you ask for it. Tell us the commodity, the invoice value, the Incoterm and how the goods are packed at booking, and we will quote Institute Cargo Clauses (A) cover warehouse to warehouse unless the commodity or route calls for something else.
