Cargo insurance covers the value of goods lost or damaged in transit by sea, air or road, and in storage if the policy includes it. You need it because carriers’ liability is limited by law and contract, often to a small amount per kilogram, and excludes many causes of loss. All-risks cover (Institute Cargo Clauses A) is the usual choice for general cargo.
Most shippers discover their real exposure after the first serious claim, when the carrier’s liability turns out to be a fraction of the invoice value. This guide explains what cargo insurance covers, how the main policy types differ, what value to insure for, and how to make a claim that actually pays.
Why Carrier Liability Is Not Enough
Every carrier, whether an airline, shipping line or lorry operator, carries some responsibility for the goods. But:
- It is limited: international conventions and carriers’ standard trading conditions cap liability, usually per kilogram or per package, at levels well below the value of most manufactured goods.
- It has exclusions: carriers are generally not liable for losses from causes such as natural disasters, poor packing by the shipper, or the nature of the goods.
- It must be proven: you have to show the carrier was at fault, within strict time limits.
Cargo insurance covers the value of the goods, whoever is at fault, subject to the policy terms.
The Main Types of Cover
| Cover | What it covers | Suits |
|---|---|---|
| Institute Cargo Clauses (A): “all risks” | All risks of loss or damage except specific exclusions | Most manufactured and general cargo |
| Institute Cargo Clauses (B) | Named perils, such as fire, sinking, collision, washing overboard and some water damage | Robust goods where theft and handling damage are low risks |
| Institute Cargo Clauses (C) | A narrower list of major casualties | Bulk or low-value cargo |
| Inland transit cover | Road transport within Malaysia | Lorry deliveries and distribution |
| Stock or warehouse insurance | Goods in storage, such as fire, flood and theft | Inventory held in a warehouse |
Even ICC (A) excludes some causes, such as insufficient packing, inherent vice (for example fruit ripening), ordinary wear, delay, and wilful misconduct. Packing is the shipper’s responsibility. Our guide to preparing cargo for safe delivery covers the standard insurers expect.
Single Shipment or Open Policy?
Occasional shippers can insure each shipment separately. Regular shippers usually take an open (annual) policy, which covers all shipments within agreed limits automatically, with shipments declared periodically. It avoids gaps when someone forgets to insure a shipment, and the rate is usually better.
What Value to Insure For
A common basis is the invoice value plus freight and insurance costs, plus 10% to cover extra costs such as replacement freight and handling. Under-insuring is risky. If goods are insured below their value, a claim can be reduced in proportion. Make sure the insured value and the currency match the commercial invoice.
General Average: The Sea Freight Risk Shippers Forget
When a vessel faces a common danger and sacrifices are made to save the voyage, for example cargo jettisoned or salvage paid, all cargo owners contribute in proportion to their cargo’s value. That applies even if their own goods arrived undamaged. Uninsured cargo owners may have to put up a cash deposit before their cargo is released. With insurance, the insurer provides the guarantee. It is rare, but when it happens the cost can be significant.
Insurance by Mode
- Sea freight: the longest exposure: handling at ports, weather, condensation in containers and general average. Insurance is strongly advisable. See our sea freight guide for the journey.
- Air freight: shorter exposure, but high-value goods and theft risk. Airline liability is limited per kilogram.
- Road transport: handling damage, road accidents and theft, especially for high-value loads and multi-drop routes.
- Warehousing: stock in storage needs its own cover, because transit policies usually end on delivery to the warehouse or after a set number of days.
Making a Claim That Pays
- Inspect on delivery: check the piece count and packaging before signing.
- Note damage on the delivery note: write specific remarks (“2 cartons crushed, wet”) rather than “received in good condition”.
- Take photos: the cargo, packaging, container or lorry, seals and labels.
- Keep the goods and packaging: do not discard anything until the insurer or surveyor agrees.
- Notify promptly: tell the insurer and give the carrier written notice of claim within the time limits, which can be very short.
- Submit documents: invoice, packing list, transport document, delivery note with remarks, photos, survey report and claim calculation.
Many claims fail on step 2. A clean signature on the delivery note makes it hard to prove the damage happened in transit.
Claims Example: Water Damage in an LCL Shipment
A distributor ships 12 cartons of electrical goods by LCL to Kuching. At delivery, 2 cartons are wet and the products inside are corroded. The consignee writes “2 cartons wet, contents damaged” on the delivery note and photographs the cartons, the remaining cargo and the delivery lorry. The distributor notifies the insurer the same day and sends written notice to the forwarder. The insurer appoints a surveyor, who confirms seawater ingress
during transit. With ICC (A) cover and correct packing, the claim is paid on the insured value of the 2 cartons. Without insurance, recovery would depend on proving the carrier’s fault and would be capped by its liability limits.
Reducing Premiums and Claims
- Use proper export-grade packing and palletising.
- Choose FCL for fragile or high-value goods to reduce handling.
- Use sealed, direct transport for theft-prone goods.
- Keep a clean claims record by fixing root causes after any loss.
- Describe goods accurately to the insurer, because misdescription can void cover.
Cargo Insurance and Your Incoterms
Who buys insurance often depends on the Incoterm in the sales contract. Under CIF and CIP the seller insures. Under FOB, FCA, EXW and similar terms, the buyer carries the risk for most or all of the journey and should arrange cover. Our customs clearance guide includes a quick summary of Incoterms.
Insurance with De Hubs
Across our sea freight, air freight and lorry transport services, De Hubs recommends insuring your cargo, especially fragile and high-value goods, and can advise on cover based on their value. For goods stored in our warehouses, customers insure based on the product’s value, or we can purchase insurance on your behalf based on the declared value.
Frequently Asked Questions
What does cargo insurance cover?
Cargo insurance covers physical loss of or damage to goods in transit, by sea, air or road, depending on the policy. All-risks cover (Institute Cargo Clauses A) covers most causes except listed exclusions such as poor packing, inherent vice and delay.
Isn’t my cargo already covered by the carrier?
Only partly. Carriers’ liability is limited by law and contract, often to a small amount per kilogram or per package, and many causes of loss are excluded. Cargo insurance covers the value of the goods.
How much does cargo insurance cost?
Premiums are usually a small percentage of the insured value, depending on the goods, route, mode, packing and claims history. Fragile, high-theft and perishable goods cost more to insure.
What value should I insure my cargo for?
A common basis is the invoice value plus freight and insurance, often with a 10% uplift to cover additional costs. Agree the basis with your insurer or broker.
Does De Hubs arrange cargo insurance?
De Hubs recommends insurance for sea, air and road shipments and can advise on cover. For warehoused goods, customers insure based on product value, or De Hubs can purchase insurance on their behalf based on the declared value.