Cargo Insurance: Things to Know

Cargo insurance is needed because cargo in transit means cargo at risk. There are many insurance options for shippers seeking to protect their cargo against loss or damage, whether by accident, natural disaster, theft, war, mishandling, or spoilage.

  • The broadest form of cargo insurance coverage is called an “all-risk” policy. An all-risk policy insures approved general merchandise in the event of physical loss or damage from any external cause. Such policies cover new packaged goods to loss from breakage, pilferage, or damage to the goods themselves. However, shippers should be aware that there are numerous exclusions. These exclusions exist even to “all-risk” cargo insurance. Some of these exclusions include improper packing, abandonment of cargo, rejection of goods by customs, and losses caused by temperature or pressure changes. (as sometimes occurs in air shipments)
  • “Free of particular average” (FPA) coverage is limited coverage that usually applies to used merchandise, waste materials, and goods shipped that are subject to an on-deck bill of lading. It covers partial and total losses due to the sinking, stranding, burning, or collision of the vessels due to catastrophes on shore such as earthquake, derailment, pier collapse, fire, etc.
  • “With average” (WA) coverage extends FPA coverage to include the peril of bad weather. Both FPA and WA cargo insurance can also be extended to include theft and non-delivery.
  • “Warehouse to warehouse” protection insures goods from the time they leave the shipper’s warehouse until they reach the consignee’s warehouse, provided they are not removed from the normal course of transit by the insured. Shippers should beware that there are exceptions. They need to understand when in the shipping timeline a particular policy takes effect and when in the timeline such coverage ceases.
  • “Condition of average” (also called under insurance) is the term used when calculating a payout against a claim where the policy undervalues the sum insured. The history of average clauses began with cargo insurance. If part of a cargo shipment had to be thrown overboard during severe weather to save the ship, the owners of the remaining cargo would jointly and proportionately make good on the loss to the owner of the jettisoned cargo. This is commonly referred to as the “law of general average.” In the event of partial loss of a shipment, the amount paid against a claim will be in the same proportion as the value of the underinsurance. Under this system, the amount of the payout is equal to the claim amount x the sum insured / current value.

Scan your cargo policy quote carefully before choosing the best type of coverage for your goods. We hope that with this information, making a decision about cargo insurance will be much simpler. Get the best quotes from to save money while protecting your merchandise.

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