Ocean and air carriers operate under contracts and liability limits that may not equal the commercial value of the goods. Cargo insurance is designed to protect the insured party against covered physical loss or damage during transit, but policies differ widely. The lowest premium is not necessarily the best protection.
Carrier liability is not cargo insurance
A carrier may be liable only when the claimant proves that the loss occurred within the carrier’s responsibility and no contractual defense applies. Compensation may also be limited by package, weight or transport convention. Cargo insurance is a separate contract between the insured and insurer and responds according to the policy wording, exclusions and insured value.
Who should arrange insurance?
The sales contract and Incoterm can allocate the obligation to arrange insurance, but risk transfer and insurance coverage are not always identical. CIF and CIP include an obligation for the seller to obtain insurance at the contractually required level. Under other terms, either party may choose to insure its own financial interest. The buyer and seller should confirm the responsible party before shipment and avoid duplicate or missing coverage.
What should the policy cover?
Review the insured voyage, transport modes, origin and destination, commodity description, packing method and valuation basis. Ask whether warehouse-to-warehouse movement, intermediate storage, transshipment, inland trucking and general average are included. Coverage described as “all risks” still contains exclusions and conditions; it does not mean every event is insured.
Common exclusions and limitations
- Insufficient or unsuitable packing
- Inherent vice or normal deterioration
- Ordinary leakage, weight loss or wear
- Delay without covered physical damage
- Willful misconduct
- War, strikes or sanctions unless specifically covered
- Unexplained inventory shortage
The exact wording controls, so commodity-specific risks—such as rust, temperature variation, breakage, theft or moisture—should be discussed before the policy is issued.
How is the insured value calculated?
Policies often insure the commercial invoice value plus freight and an agreed uplift, but methods vary. Declare the value accurately and confirm the currency. Underinsurance, incorrect commodity descriptions or undisclosed used goods may affect a claim.
What to do when cargo is damaged
- Protect the cargo from further damage where reasonably possible.
- Notify the carrier, forwarder and insurer immediately.
- Record the seal, container, packaging and damage with photographs or video.
- Request a survey when required.
- Keep the bill of lading or air waybill, invoice, packing list, delivery receipt and repair or salvage records.
- Submit a written claim within applicable time limits.
Questions to ask before purchase
Ask who is insured, when coverage starts and ends, which risks are excluded, what deductible applies, whether general average and salvage charges are covered, and which documents are needed for claims. Special cargo, used machinery, refrigerated goods and high-value products may require additional underwriting.
Plan insurance before departure
Insurance should be arranged before the risk begins, not after a loss is discovered. China Vast Logistics can provide shipment details and coordinate transport documentation, while coverage terms and claims decisions remain subject to the insurer and policy wording.
This article provides general information and does not replace advice from a licensed insurance professional.
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