What is Cargo Insurance?

In the simplest terms, cargo insurance covers the cargo owner against loss to their property when it is in transit, much like car and homeowner’s insurance is purchased to protect the financial interests of the owner of the vehicle or house. Covered modes of transit might include air carrier, ocean vessel, truck or train. Cargo insurance covers against physical loss or damage from an external cause that occurs while goods are in route to their final destination. These include perils such as theft, damage, fire on vessels, natural disasters like floods, hurricanes, storms at sea and more.


Will the carrier or the warehouseman pay my loss?

It is a reasonable assumption but usually a false one. Carriers such as steamship lines or airlines are not usually responsible for losses that are unforeseeable and beyond their control. For example, carriers are not commonly responsible for the causes of loss such as fire (unless caused by the actual fault of the carrier/warehouseman), vessel collision or “Act of God,” because they are beyond their control.


Why aren’t carriers responsible for losses to cargo in their control?

National and international treaty restrictions limit the monetary liability of most carriers. Further protecting the carrier or warehouseman is the fact that the Burden of Proof is typically on the cargo owner. This means that the cargo owner must prove the carrier’s negligence to receive compensation for a loss. However, compensation is typically limited to amounts that are much less than the value of the cargo.


How much are carriers obligated to pay in the event of a loss?

The amounts carriers and intermediaries are obligated to pay are limited. See the chart below for reference: 

The best means to protect the financial interests of the cargo owner is to secure cargo insurance for each and every shipment at risk.


what is the difference between declared value and cargo insurance?

Declared value refers to a process that increases the amount that the cargo owner can recover from the carrier, IF the carrier is found to be negligent in the event of a loss. Carriers are legally required to offer shippers the opportunity to increase the limit of liability. However, it is not the same as cargo insurance. A carrier’s liability for lost or damaged cargo may be limited based on the documentation they’ve issued. The amount recoverable is usually much less than the actual claim amount.


what is general average and why would i incur costs if my cargo is not destroyed?

General Average is an ocean marine policy term meaning that a partial loss, which has resulted from the voluntary and deliberate sacrifice of some cargo for the benefit of all concerned, must be shared by all parties (owners of ship, cargo and freight) in proportion to their interest. For example, if 100 containers were jettisoned from a 1,000 container load in order to protect the ship, the owners of the remaining 900 containers, the owners of the ship, and the owners of the freight would all contribute to offset the losses of those whose cargo was jettisoned. In this case, if the cargo is not insured, it will not be released until a guarantee has been returned and accepted, which must be in the form of a cash deposit, bank guarantee or bond.



If you’re a client of Welke Customs Brokers USA, we can facilitate a policy for you. n conjunction with our insurance partner, Roanoke Trade International, we offer services to arrange for cargo insurance to protect your financial interest. Our insurance program provides protection against all risks of physical loss or damage to goods from any external factor during shipping by land, sea or air.