Shippers often assume the trucking company, ocean line or airline will pay if goods are lost or damaged. In reality, carriers are liable only in specific circumstances and usually up to limits that can be far below the invoice value. Cargo insurance closes that gap by insuring the goods themselves, whoever is at fault.
Why carrier liability is not enough
- US motor carriers. Under the Carmack Amendment (49 U.S.C. 14706), carriers are liable for actual loss or injury to the property, but they may limit liability to a value declared by the shipper or agreed in writing, if that value is reasonable. Carriers may not set a deadline shorter than 9 months for filing a claim or 2 years for filing suit.
- International air. Under the Montreal Convention, the cargo liability limit is 26 Special Drawing Rights (SDR) per kilogram for losses from December 28, 2024, up from 22 SDR, according to Clyde & Co's summary of the ICAO revision (2024).
- Ocean carriage. Carriers rely on statutory and contractual defenses and package limits, and cargo owners can also be asked to contribute to general average after a casualty, even if their own goods arrived undamaged.
Institute Cargo Clauses A, B and C
Most international cargo policies use the Institute Cargo Clauses issued by the London market; the current revision took effect on January 1, 2009 (If Insurance). There are three main sets:
| Clauses | Type of cover | Typical use |
|---|---|---|
| ICC (A) | All risks of physical loss or damage, subject to listed exclusions | Manufactured goods, high-value and fragile cargo |
| ICC (B) | Named perils, broader than (C) | Some bulk and lower-value goods |
| ICC (C) | Named major casualties only, often called minimum cover | Bulk commodities, budget-driven contracts |
All three exclude losses such as insufficient packing, inherent vice, ordinary wear, delay and willful misconduct of the insured. War and strikes risks are covered only when the separate Institute War and Strikes Clauses are added.
What Incoterms 2020 say about insurance
Only two Incoterms rules oblige the seller to insure. According to the ICC Academy, under CIF the seller must obtain the lower level of cover, Clauses (C), while under CIP the seller must obtain cover complying with Clauses (A). The parties can agree otherwise in the contract. Under the other rules, such as EXW, FCA, FOB or DAP, there is no insurance obligation, so the party that bears the risk at each stage should arrange its own cover. A buyer purchasing CIF who wants all-risks protection needs to negotiate it or buy additional insurance.
Single shipment or open cargo policy
Occasional shippers can insure one shipment at a time. Regular importers and exporters usually buy an open (annual) cargo policy that automatically covers all shipments within agreed limits per conveyance, reported monthly or annually. Key terms to check are the warehouse-to-warehouse transit clause, the basis of valuation (commonly invoice value plus an agreed margin for freight and expenses), storage in transit, and coverage for goods held at a warehouse before or after the voyage.
Where inland marine fits
The Insurance Information Institute (Triple-I) explains that ocean cargo coverage ends when products continue their journey overland by rail or truck unless the policy extends inland, and that inland marine insurance covers products, materials and equipment transported over land or temporarily warehoused by a third party. Triple-I identifies collisions and cargo theft as the two most frequent causes of inland marine losses. Truckers buy motor truck cargo coverage for customers' goods, while owners of goods buy transit coverage for their own property.
Handling a cargo claim
- Note visible damage or shortage on the delivery receipt before signing.
- Notify the insurer and request a survey before discarding or repairing goods.
- Give written notice of claim to the carrier within the contractual and legal deadlines.
- Keep the bill of lading, commercial invoice, packing list, photos and correspondence.
Your insurer pays you and then pursues the carrier through subrogation, so preserving rights against the carrier matters. See the cargo and inland marine category, marine insurance and transport reinsurance. Policies are issued by licensed insurers and placed through licensed producers; request a quote for your shipments.