The most expensive assumption in international trade is that the carrier will pay for it. Carriers are liable for cargo loss and damage, but their liability is capped by international convention at a figure calculated on weight or package count, never on value. On most cargo that cap pays out a small fraction of what was lost.
Cargo insurance exists to cover the difference. It is also considerably cheaper than most first-time buyers expect, typically a fraction of one percent of the insured value on ordinary goods.
What the carrier actually owes
Take a container of consumer goods, 8,000 kg gross, worth USD 300,000, lost overboard. Under the Hague-Visby Rules the carrier owes the higher of 666.67 SDR per package or 2 SDR per kilo. At 2026 exchange rates that is roughly USD 2.74 per kilo, so about USD 21,900 on the weight calculation. Around 7 percent of the value.
By air the Montreal Convention limit is 26 SDR per kilo, about USD 35.62, which rose from 22 SDR on 28 December 2024. Better per kilo, but air cargo is chosen for high value per kilo, so the proportional shortfall is often worse.
Under US COGSA it is USD 500 per package, a figure unchanged since 1936.
Full detail, including the package enumeration point that can swing a claim by hundreds of thousands of dollars, is in carrier liability limits.
And that is the ceiling, not the expectation
Before reaching the limit, the carrier has defences. Under Hague-Visby these include error in navigation or management of the ship, perils of the sea, act of God, inherent vice and insufficient packing. Nautical fault is the striking one: the carrier is not liable for cargo lost through its own crew's navigational error.
You must also prove the loss happened in the carrier's custody, give notice in time, and sue within one year under Hague-Visby. Cargo insurance responds to the loss itself, subject to its own exclusions, without you first having to establish fault.
General average, which is not about your cargo at all
The strongest single argument for cargo insurance is general average. When a sacrifice or extraordinary expense saves the ship, every cargo owner contributes in proportion to the value saved. Your undamaged containers will not be released until you post security, often 10 to 50 percent of cargo value, and the adjustment can take years.
An uninsured shipper has to find that cash. An insured one has their insurer issue a guarantee. See general average explained.
What a policy covers
Cover is written on Institute Cargo Clauses (A), (B) or (C). (C) and (B) are named perils covers responding only to listed events. (A) is all risks, subject to exclusions, and is the only one that picks up theft, pilferage, non-delivery, handling damage and breakage, which is where most real claims sit. See what each clause set covers.
Cover normally runs warehouse to warehouse, ending at the earliest of delivery, storage elsewhere, or 60 days after discharge.
What it does not cover
The exclusions apply to (A) as much as to (C), and they cause most declined claims: insufficient packing by you, inherent vice, delay even when caused by an insured peril, ordinary leakage and wear, and unseaworthiness you were aware of. War and strikes are excluded and bought back separately. See what cargo insurance does not cover.
How much, and how much it costs
The standard sum insured is CIF value plus 10 percent, which comes from Incoterms and represents the buyer's lost profit and expenses. Add duty where it is paid or unavoidable. Under-insuring is penalised proportionally by the average condition, so do not shave the sum to save premium. Work the numbers with the cargo insurance calculator and read how much to buy.
One Incoterms trap: CIF requires the seller to buy only minimum cover, ICC (C). CIP requires ICC (A). A buyer relying on a seller's CIF policy may hold the narrowest cover available.
Getting it right
- Buy ICC (A) for anything manufactured, fragile or valuable.
- Insure CIF plus 10 percent as a floor, in the contract currency, on an agreed value basis.
- Confirm war and strikes cover for your route.
- Get an open cover if you ship regularly, so a forgotten declaration is still covered. See certificate, policy or open cover.
- Check the destination claims agent before you need one.
- Pack for the transit you booked, and keep the specification, because insufficient packing is an exclusion.
General guidance, not insurance advice. Your policy wording governs your cover.
