Cargo insurance pays you for goods that are lost or damaged in transit, whatever the carrier owes you. A sea freight policy usually costs about 0.2% to 0.5% of the cargo's value, it is written on the Institute Cargo Clauses A, B or C, and it also covers your share of general average, the bill every cargo owner on a ship can receive after a fire or a grounding.
Many importers assume the shipping line is responsible for what it carries. It is, but only up to a limit set by international law, and only for causes it is liable for. Cargo insurance exists because the gap between what your goods are worth and what a carrier must pay is usually large.
This guide covers what each level of cover includes, what a policy costs, the exclusions that catch people out, and how to decide whether a shipment needs it.
Why Carrier Liability Is Not Cargo Insurance
The bill of lading makes the shipping line liable for your cargo, but the law caps that liability and excuses the carrier altogether for some causes of loss.
The limits per package and per kilo
Under the Hague-Visby Rules, which govern much of the world's sea freight, a carrier's liability is capped at 666.67 SDR per package or 2 SDR per kilogram, whichever is higher, according to Unicore's rate guide. The SDR is a unit set by the International Monetary Fund from a basket of currencies. Under the US Carriage of Goods by Sea Act, the limit is 500 dollars per package.
Take a 40,000 dollar shipment of ten pallets weighing 500 kilos each. The package limit gives 6,667 SDR, the weight limit gives 10,000 SDR, and the higher figure is still a fraction of the invoice. The claim also has a deadline: notice at delivery, or within three days if the damage was not visible, and legal action within one year.
When the carrier owes nothing
The cap is only part of the gap. Hague-Visby and US COGSA both excuse the carrier from liability for loss caused by an error in the navigation or management of the ship, and from unseaworthiness when the owner exercised due diligence to make the vessel seaworthy. A collision caused by a bridge watch mistake can destroy your cargo and leave the shipping line owing you nothing.
Institute Cargo Clauses A, B and C Compared
Most marine cargo insurance is written on the Institute Cargo Clauses, the 1/1/09 wording published by the Lloyd's Market Association and the International Underwriting Association. The three levels differ in one basic way: A covers everything that is not excluded, while B and C cover only a list of named events.
| Clause | How cover works | Theft covered | Typical use |
|---|---|---|---|
| ICC A | All risks, except listed exclusions | Yes | Manufactured and consumer goods, the CIP minimum |
| ICC B | Named perils, a longer list than C | No | Mid-level cover at a mid-level premium |
| ICC C | Named perils, major casualties only | No | Bulk cargo, the CIF minimum |
What Clause C actually lists
Claims management firm Sedgwick lists what Clause C pays for: fire or explosion, the ship stranding, grounding, sinking or capsizing, collision, the overturning or derailment of a land vehicle, discharge of cargo at a port of distress, and general average sacrifice or jettison. Anything else, such as a forklift puncturing a carton or a container being opened and emptied, is not covered.
Why Clause A is the usual choice for containers
The Clause (A) wording opens by covering "all risks of loss of or damage to the subject-matter insured" except what its exclusion clauses remove. For boxed goods exposed to theft, water damage and rough handling, that difference matters far more than the premium gap. Sedgwick notes that Clause A carries the highest premium, B is priced in between, and C is the cheapest option.
What Even All Risks Cover Leaves Out
"All risks" is a label, not a promise. Clause A excludes several causes of loss, and these are the ones that produce rejected claims:
- Insufficient packing: if the goods were not packed or stowed in the container well enough to survive normal transit, the loss is yours.
- Inherent vice: loss that comes from the nature of the goods themselves is excluded.
- Delay: loss caused by delay, such as a missed sales season, is excluded.
- Wilful misconduct by the insured party.
- War and strikes: both are excluded from the standard clauses and added back with the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo).
Packing is the exclusion importers control most directly. A survey report that blames poor lashing or weak cartons can end a claim before it starts.
War cover on today's routes
War cover used to be a formality on most lanes. In 2026 it is not. Paul Bradshaw of Emirates National Oil Company told Reuters in September that cargo insurance for Gulf voyages had reached up to five or six percent of cargo value. Ships pay their own war premium on top: S&P Global reported a tanker in March whose war risk premium of 7.5 million dollars was larger than the 6.5 million dollar freight for the voyage. Our guide to the Strait of Hormuz explains why so much traffic passes through one narrow channel.
If you have cargo on a Gulf or Red Sea routing, confirm that your policy includes war cover before the ship sails. Primo Nautic shows the vessel's live position and course, so you can see which way your carrier actually routed the ship instead of relying on the original schedule.
Cargo Insurance Cost: How the Premium Is Calculated
Cargo insurance cost is a rate multiplied by an insured value. Both halves are worth understanding before you compare quotes.
The insured value: CIF plus 10%
The market standard is to insure 110% of the CIF value, meaning the cost of the goods plus freight plus insurance, with 10% added for the profit and expenses you lose if the goods never arrive. US broker Trade Risk Guaranty describes this as the default for both the premium calculation and the claim payment: the premium is the policy rate times 110% of the cost of goods, and a covered loss is paid at the same 110%, less the deductible.
The rate
Unicore puts typical marine cargo insurance at about 0.2% to 0.5% of value for sea freight, with most insurers charging a minimum premium of 25 to 50 euros per shipment. Extensions add to the base rate: war, strikes and refrigeration breakdown each add 0.05% to 0.15%.
A worked example
Using the 40,000 dollar shipment from earlier:
| Item | Amount |
|---|---|
| Goods (invoice value) | 40,000 USD |
| Ocean freight | 3,000 USD |
| CIF value | 43,000 USD |
| Insured value at 110% | 47,300 USD |
| Premium at 0.3% | about 142 USD |
At the top of the usual range, 0.5%, the premium would be about 237 dollars. Either figure is small against a carrier recovery capped at 10,000 SDR, or nothing at all if the loss was a navigation error.
What moves the rate
The rate depends on the commodity, how it is packed, the route, the cover level, the deductible you accept, and your claims history. A higher deductible lowers the premium. Trade Risk Guaranty also notes that rates are almost always higher when cover is bought through a freight forwarder rather than directly from an insurer or broker, so it is worth getting at least one direct quote if you ship regularly.
General Average: The Bill You Get Without Losing Anything
General average is the rule of the sea that surprises importers most. When a ship's master spends money or sacrifices cargo to save the voyage, for example by calling in salvors after a fire, every cargo owner on board shares the cost in proportion to the value of their goods. Your container can arrive undamaged and you still owe your share.
Recent cases
The owners of the Ever Given declared general average after the ship blocked the Suez Canal in 2021, and the owner of the Dali declared it after the ship struck the Francis Scott Key Bridge in Baltimore in 2024. Lloyd's List reported at the time that the Dali process could take years to settle.
It keeps happening. In September 2026, Maritime Executive reported that CMA CGM invoked general average after a cargo hold fire on the CMA CGM Petra, with 450 containers due to be offloaded for inspection in Port Klang and scheduled calls at Shanghai and Ningbo dropped. The same report cites Allianz data showing a containership fire on average every 17 days.
Why insurance matters here
The carrier has a lien on the cargo until general average security is provided. If your goods are insured under the standard clauses, the insurer issues a guarantee and pays your final contribution, because Clause A covers general average and salvage charges. If they are not insured, you have to provide that security yourself before the shipping line releases your container.
General average is the strongest case for insuring cargo that never gets damaged. Trade Risk Guaranty cites a study finding that a shipper will be involved in a general average incident about once every eight years.
When something does go wrong at sea, the first sign is usually a ship that stops making progress or an arrival time that slips. Primo Nautic sends delay notifications for the vessels you track, and its Cargo Shipment purpose gives precise, logistics-focused updates, so a slipping arrival time reaches you as it happens rather than through a carrier advisory later.
Who Insures the Cargo Under Your Incoterm
Whether you need to buy cargo insurance yourself depends on the Incoterm in your sales contract, because it decides where risk passes from seller to buyer.
CIF and CIP: the seller buys it
According to the ICC Academy, under Incoterms 2020 a CIF seller must insure the goods to the port of destination on at least Clauses (C), while a CIP seller must provide Clauses (A), the maximum cover. The sum insured must be at least 110% of the contract price.
The trap is CIF. Risk passes to you once the goods are loaded at origin, but the seller only has to buy minimum cover. A container of electronics stolen at the destination port is not a Clause C event. If you buy on CIF, ask for Clause A in the contract or buy your own top-up cover.
FOB, FCA and EXW: the buyer decides
Under FOB, FCA and EXW, risk passes to you early and nobody else has to insure the goods. If you do not buy cover, you are self-insuring the whole voyage. Our guide to Incoterms sets out where risk transfers under each rule.
When Cargo Insurance Pays for Itself
The arithmetic is lopsided. A premium of one or two hundred dollars protects a shipment that the carrier would compensate at a fraction of its value, and covers a general average contribution the carrier can enforce through a lien.
When to insure every shipment
Insurance is hardest to skip when the goods are valuable for their weight, when they are attractive to thieves, when the route crosses a listed war area, or when losing the shipment would hurt your business beyond the invoice value, such as stock for a seasonal sales window.
When the risk is small
The odds of a total loss are low. The World Shipping Council estimates that 1,478 containers were lost at sea in 2025 out of about 280 million transported, around 0.0005%. A company shipping low-value, robust goods on a quiet lane, with cash to absorb a loss, can reasonably choose to self-insure some shipments.
For regular importers, an annual open policy is often simpler than buying cover shipment by shipment. You declare each sailing under one policy, the terms stay the same, and nothing ships uninsured because someone forgot to request a certificate.
Key Takeaways
Cargo insurance fills the gap between what your goods are worth and what a carrier must pay, which under Hague-Visby is 666.67 SDR per package or 2 SDR per kilo, and nothing at all for navigation errors. Clause A covers all risks except its exclusions, while B and C cover only named events and leave out theft.
The premium is a rate of roughly 0.2% to 0.5% applied to 110% of the CIF value, so a 40,000 dollar shipment costs under 250 dollars to insure. War cover is a separate extension, and on Gulf routes in 2026 it has become expensive. General average can make you pay for a voyage even when your goods arrive intact, and insurance is what posts that security for you. Check your Incoterm, because a CIF seller only owes you minimum cover.
