Cargo insurance: when and why is it necessary?

Cargo insurance: when and why is it necessary?

When the supply chain disruption and goods are lost or damaged, will basic insurance help you? In what cases is it better to insure additionally? We explain this in detail in the article.

Why is cargo insurance so important?

The cargo goes through many processing stages, from shipment to delivery to the final consumer. PartnerTrade knows the entire process – from loading the goods into the container to unloading at the port or airport and transporting it to the warehouse – and we recommend applying for insurance.

What insurance events happen to the cargo?

A third of insurance claims, according to Flexport, include claims for compensation for negligent treatment that led to damage to products. The shipping company usually has basic insurance coverage, but it is minimal and does not always compensate for the loss of part of the products or the entire container.

The most common risks are usually:

Loss or damaged goods

A broken pallet usually indicates it. In such circumstances, employees should inspect all goods to ensure no chips or cracks before shipping to the customer.


The lack of goods is another cause for concern for shippers. Such incidents are detected when things take to the warehouse for storage. Incorrectly executed documents lead to product shortages.

General Accident

There is such a thing as a “general accident.” If the ship is in critical condition, then part of the cargo may throw away to save the ship. This situation can occur due to fire, storm, port delays, and related costs.

When does the carrier not owe you anything?

There are cases described in the International Convention, according to which the marine transport company is not obliged to compensate anything. Among them: a mistake by the ship’s staff, natural disasters, etc.

Troubles with the cargo can also happen due to the third party’s fault, for example, during a collision ship and another vessel or theft of goods by intruders.

When is it difficult to prove the fault of the transport company?

It is also not easy to establish the cargo damage caused during ocean freight in such cases:

  1. The truckers ignored the instructions for loading on board (improper fastening of the cargo).
  2. Careless cargo stacking in the container, incorrect weight distribution.
  3. Using damaged or outdated equipment.
  4. Lack of labor or time to stack cargo.
  5. Fatigue and absent-mindedness of the crew.
  6. Lack of control over the loading process.

In such cases, the cargo sender bears additional costs for investigating illegal actions with the load, transporting goods to replace the missing or damaged ones, and related expenses. All the nuances of damage or loss must be strictly documented and have a damage description (photo of the product in its original form and the result of the employees’ processing).

Which insurance to choose?

Basic sea line insurance determines the minimum amount of compensation – about $2 per kilogram of cargo. If the cost of products is higher, you will lose a decent amount.

Additional insurance of Class A (extended liability for any type of risk), Class B (basic partial liability coverage), and Class C insurance (limited risk coverage) compensates for financial losses.

Covering 110% of the commercial shipping estimate, including freight and duties, is an ideal option. Insurance rates vary depending on the one-time order of this service or annual service from the insurer.

Here’s an example: you have a batch of $100,000 consignment at 10% of net profit, then without an insurance policy, you will need $1 million in sales to cover the price of the lost cargo.

Considering the above arguments, PartnerTrade recommends customers consider all the pros and cons and choose an insurance option that best meets the specifics of transportation and cargo cost. We will help you arrange it.


Why is cargo insurance an essential step before preparing for shipment?

The container is exposed to many risks during reloading and transportation to the right destination. Insuring cargo against possible damage is a reliable way to recover lost money.

What can happen to the cargo in transit?

Goods may be broken, lost, or thrown away to save the ship and its crew and avoid unnecessary expenses during downtime in the port.

Which insurance policy is optimal?

This choice is an individual decision for each order. It is optimal to cover 110% of the cargo price and freight costs.

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