Understanding the importance of cargo insurance in protecting your company’s interests is in many ways about understanding the terminology. Here is a glossary* to keep you in-the-know.

Act of God

A natural event, not preventable by any human agency, such as flood, storms or lightning.  Forces of nature that a carrier has no control over and therefore cannot be held accountable.

All Risk Insurance

One of the broadest forms of coverage available, providing protection against all risks of physical loss of damage from any external cause except for what may be excluded in the policy.  Does not cover loss or damage due to delay, inherent vice, pre-shipment conditions, inadequate packaging or loss of market.  Loss must be fortuitus to be covered.

Approved Merchandise

Goods not particularly susceptible to loss or damage, either by reason of their nature or because they are well packed.  This term embraces practically all manufactured articles or new merchandise.

Bill of Landing (BOL)

The document issued on behalf of the carrier describing the kind and quantity of goods being shipped, the shipper, the consignee, the ports of loading and discharge and the carrying vessel.  The Bill of Landing serves as a receipt for merchandise given to the shipper by the carrier, document of title giving the lawful possessor title to goods, contract of carriage between shipper and carrier and evidence of the apparent condition of the goods when received by the carrier.

Burden of Proof

Responsibility of the shipper to prove that a loss is due to the negligence of a third-party such as the carrier.

Cargo Insurance

Insurance intended to protect a cargo owner’s financial interest from loss or damage to cargo in the due course of transit.

Coverage Types

Sometimes referred to as the Insuring Agreement or Insuring Conditions, provide a summary of what the insurance company promises to do in the policy.  Coverage types state what the policy covers in the broadest terms.

Declared Value

The shipper may increase the carrier’s stated limits of liability by declaring value for an agreed upon price.  Declared value is not insurance.

Duration Clause

Clauses that restrict the period of time for which a shipment of cargo will remain insured.  Time frames are normally defined in Warehouse to Warehouse, Duration of risk, Marine Extension Clauses or something similar.  These clauses define when coverage begins and when it ceases.

Excluded Perils

Certain perils may be excluded from coverage in an All Risk policy.  These perils can be found in the Exclusions in the policy language.

FPA (Free of Particular Average)

Sometimes referred to as “named perils” a coverage type that limits recovery of partial losses to specified perils.

General Average

A partial loss that is shared proportionately by all parties involved in a sea voyage when any extraordinary sacrifice or expenditure of cargo, equipment, or funds is intentionally made to preserve lives or property.

Geographic Limits

The Geographic Limits state where in the world the policy covers a loss and where a loss would not be covered.


A set of international rules for the uniform interpretation of commonly used trade terms in foreign trade.  They describe in detail the responsibilities of the sellers and buyers in international trade.

Inherent Vice

A loss cause by the inherent nature of the thing insured and not the result of a casualty or external cause.

Insurable Interest

In order to be able to collect under a cargo policy, the insured must have an insurable interest in the property at the time of loss.  A company or individual has an insurable interest in cargo when loss or damage to it would cause to entity to suffer a financial loss.


A contract that transfers risk of loss from a policy holder to an insurance company in exchange for paid premium and adherence to terms and conditions.


The policy holder in an insurance contract.


The insurance company in an insurance contract.

Legal Liability

Responsibility imposed by law.

Limit of Liability

A stated monetary limit that a carrier or LSP will pay in the case that a shipper’s goods are damaged or lost in their care, custody or control.  The limit of liability found in the contract language, most often within the bill of landing.

Logistics Service Provider (LSP)

Any company who assists a cargo owner with some aspect of logistical or clerical side of transportation of goods.

Monetary Limits

The monetary limits of a policy determines how much the policy owner will cover.


A cause of loss in an insurance policy.  Perils may be covered on an “all risk” basis or a “named perils” basis, and perils may be specifically excluded in the policy.

Perils of the Seas

Fortuitous accidents or casualties, peculiar to transportation on a navigable water, such as stranding, sinking, collision of the vessel, striking a submerged object or encountering heavy weather or other unusual force of nature.


The right of the underwriter to step into the shoes of the assured following payment of a claim to recover the payment from another party who is responsible for the loss.  Limited to the amount paid in the policy.

Third-Party Liability

The legal obligation of an individual, entity, or company to pay for the damages or injury of another party.

Transfer of Risk

The risk management strategy of moving the financial burden of loss from one party to another.

Valuation Clause

The clause in the Marine Policy that contains a fixed basis of valuation agreed upon by the assured and the underwriter and which establishes the insured value of the merchandise.  The clause determines the amount payable under any recoverable loss or General Average contribution.

* Courtesy of Roanoke Trade

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