Freight Insurance: Comprehensive Guide to Protecting Your Cargo

Cargo insurance is essential protection for international shipments, yet many shippers operate with inadequate coverage or misunderstand their existing protection. This guide explains insurance options and best practices for comprehensive cargo protection.

Understanding Carrier Liability Limitations

Carrier liability is limited by international conventions—approximately USD 500 per package for ocean freight under the Hague-Visby Rules, and around USD 20 per kilogram for air freight under the Montreal Convention. These limits rarely cover full cargo value.

These limitations exist because carriers cannot evaluate the value of sealed packages. Shippers who want full value protection must arrange their own cargo insurance.

All-Risk vs Named Perils Coverage

All-risk policies provide the broadest protection, covering any cause of loss not specifically excluded. This is the recommended coverage for most commercial shipments.

Named perils policies cover only specific listed risks, such as fire, collision, or weather damage. While cheaper, gaps in coverage can leave shippers exposed to significant losses.

Warehouse-to-Warehouse Coverage

Modern cargo insurance provides warehouse-to-warehouse coverage, protecting goods from the moment they leave the origin warehouse until arrival at the final destination. This eliminates coverage gaps during transit.

Extensions can include storage periods at origin or destination, providing continuous protection throughout the supply chain.

Claims Procedures

When damage occurs, immediate notification to the insurer and carrier is essential. Document damage with photographs before further handling, and preserve damaged goods for inspection.

Claims require commercial invoice, packing list, bill of lading, survey report, and proof of loss amount. Organized documentation significantly accelerates claims processing and payment.

Premium Optimization

Premium rates reflect cargo type, trade lane, carrier, and claims history. Improving packaging, selecting reputable carriers, and maintaining good claims records can reduce insurance costs over time.