Cargo Insurance Glossary


When property is taken by force by thieves


Any partial damage or loss, due to insured risks.


Certificate signed by cargo possessor  where they agree to pay for all General Average amounts properly so the release of cargo shipments can occur after a General Average loss has taken place.


The fine print  in Cargo insurance policy that details the amount of Particular Average loss recovery.


Criminal, dishonest or dishonorable act by the captain or crew of a ship which results in damage or loss to either the ship’s cargo or the ship itself.


A contractual agreement between the cargo shipper and the steamship company.  This agreement is the ship owners’ valid receipt for the goods.


A cargo insurance policy which is a second (secondary) policy.  It covers waterborne only cargo providing coverage against any risk deemed a war risk.


A certificate prepared by an insurance company, the one insured or the producer  which is proof of insurance to the bank or buyer for any import/export shipment.


Cost and Freight- this means that it is the liability of the seller to shoulder the costs and freight required to bring the merchandise to the predetermined port but after it has been delivered and has been boarded on the vessel, the risk of any kind of damage, loss or any added expense arising due to any event will automatically get transformed from the seller to the buyer. The CFR is necessary for the seller to make the goods get a clean sheet for export. The term CRF can only be used in the instance of marine or inland waterway transportation.


Cost, Insurance and Freight- this term means that the seller has to bear the same responsibility mentioned under CFR and in addition he requires to buy a marine insurance against the buyer’s risk of damage or loss of the goods during the transit. The sellers pays the insurance premium but it must be noted by the buyers that the seller require to buy a minimum premium under the terms and conditions mentioned in the CIF, which only requires the seller to clears the goods for export. This term is only applicable for sea or inland waterway transits. The CIP term is a more appropriate term when the ship’s rail serves not practical purposes in circumstances like container traffic, roll-on or roll-off.


Carrier and Insurance Paid To – this term implies that the seller needs to bear the same responsibilities mentioned under CPT along with the requirement for buying a minimum amount of cargo insurance against the buyer’s risk for loss or damage of the merchandise while it is being transited. The CIP too requires the seller to clear the goods for export and it may be used for any form of transport or multimodal transport.


Defined as the company or person to whom cargo is delivered to

Constructive Total Loss (CTL):

When the actual cost of either fixing or recovering goods that have been damaged is greater than the insured value


Carriage Paid To – this implies that the seller is required to pay the carrier for the cargo transit to a predetermined location. After the goods have been delivered to the carrier, all cost that may include the risk of loss or damage or any additional cost arising from any event that may take place after the delivery is automatically transferred to the buyer. The CPT too, requires the seller to clear the goods for export. The CPT can be used for any form of transportation that may include the multimodal transports too.


Delivered At Frontier – the seller requires to fulfill his responsibility to deliver after the consignment has been made available at a place mentioned at the frontiers but prior to the custom border of the neighboring country. The term “frontier” may refer to the country of export. Hence, it is absolutely necessary to mention the point of the place in the term. This term may be used for any mode of transport but is generally used for goods being carried on rails or by road.


Delivered Duty Unpaid – The term entails that the seller is obligated to deliver the goods to the named port for import. The seller is also liable for making payments for the cost involved in bringing the goods to the named location or port along with the additional charges for custom procedure. The buyer has to shoulder the responsibility of the risk factors that may surface if the goods are not cleared for import on time. If the parties want the seller to bear the probable risks and costs involved in the custom formalities, it should be stated clearly by including the words “Delivery Duty unpaid, VAT paid (named port or destination)”. The DDU is used for any means of transportation.


Document  completed and sent to the insurance company  by the assured that reports individual shipments coming within the terms of an Open policy.


Delivery Ex Quay (Duty Paid) – according to this term, the seller has to bear the liability for delivering the goods to the buyer at the predetermined location, cleared for import. The seller has to pay for all expenses like taxes, duties and other charges necessary for the transit of goods to the named destination or port. This term should not be used if the seller is not able to acquire the import license directly or indirectly. If the parties want the sellers to pay to clear the goods for import the term “duty unpaid” should be mentioned instead of “duty paid” but if the parties wish to remove some of the cost payable for importation of merchandise such as VAT etc from the seller’s obligations, it needs to be made clear by clearly stating the words “Delivery Ex quay, VAT unpaid (named port of destination)”. The DEQ can only be used for sea or inland waterways transportation.


Delivered Ex Ship -The seller is obligated to deliver the cargo once it is made available to the buyer on the ship unclear for import at a mentioned port. The seller is to shoulder the burden of cost of bringing the cargo to the specific location. The term is used for sea or inland waterways cargo transitions.


When a ship diverts to a location that is not described in the Bill of Lading


EX WORKS -The seller is obligated to deliver to the buyer when the goods are ready at his premises like the workshops, factory, warehouse etc. The seller is no liable to load the consignment on the vehicles brought by the buyer or for clearing the consignment for export. Exceptions are possible if agreed otherwise. The buyer has to bear all the expenses for transiting the goods from the seller’s premises to the desired destination. This term has minimum responsibility for the sellers. This term should not be used if the buyer fails to fulfill the export responsibility directly or indirectly. In such cases FCA may be used.


Free Alongside Ship – Seller is obligated to deliver the consignment when the consignment is made available along side the wharf or in the lighters at a predetermined port. The buyer is liable to bear the responsibility of the cost or risk of damage or loss to the cargo for export. If the buyer fails to carry out the export formalities directly or indirectly, then this term should not be utilized. This term is only utilized for sea or inland waterway transportation.


Free Carrier – Seller is obligated to deliver the goods that has been cleared for export to the carrier named by the buyer at a pre decided point or location. If the location is not mentioned by the buyer, the seller may choose a place where he can handover the consignment to the carrier. According to the commercial practice, the assistance of the seller may be required to facilitate creating the contracts with the carrier like in rail or air transport, the seller can act at the risk and expense of the buyer. This term may be used for any form of transportation including the multimodal ones.


Free On Board – this term implies the obligation of the seller to deliver the consignment untill it has been passed over the ship’s rails at a predetermined port. The buyer is liable to bear all the cost and risks for all probable losses or damages to the cargo from that point onwards. The seller is needed to clear the goods for export. This term is made only for sea or inland waterway transits. FCA is the most appropriate term in the ship’s rail serves no practical purpose in cases of container traffic, roll-on or roll-off.


When a ship voluntarily sacrifices a part of a vessel or goods in order to protect the ship or the remaining cargo.  When a loss happens due to this, the claim is paid on a pro rata basis by all the cargo owners and the ship owner.


Document that details all the terms of a sale including goods, cost and discounts


Calculated by adding freight costs, insurance premium and invoice costs


Willingly dumping the material from a ship which can include actual cargo in order to secure and protect other cargo/ property from damage or danger


A condition in a cargo insurance policy when cargo insurance coverage on goods continues during any variation from normal transit that is outside the control of the assured.  This includes re-shipment, transshipment, deviation or delays.


A trained specialist that gathers information to determine the cause, extent and nature of loss or damage of cargo.


Unusual happenings in a voyage that are detailed in a sworn statement by the captain of a cargo ship


Partial loss relating to the goods that are insured with cargo insurance


Dangers that exist pertaining to natural forces of the sea including turbulent weather and windstorms


Provides a way to determine the  insured value of a cargo shipment under the Open Cargo policy.


Cargo Insurance that protects against damage or complete loss to cargo or property due to risks of war


A clause in a cargo insurance policy that provides coverage from the shippers warehouse to the warehouse of the consignee  during ordinary transit