What Is Cargo Insurance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 August 2019
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Also known as cargo marine insurance, cargo insurance is a type of insurance that helps to provide compensation in the event that goods are damaged during transit from the seller’s location to the buyer’s location. Typically used in a shipping environment that involves travel from one country to the next, the insurance coverage only covers the transport period from leaving the docks in the country of origin and arriving at the docks at the point of destination. The actual mode of transport may be by waterway, over land, or even by air.

There are several benefits to securing cargo insurance for goods that are transported over long distances, especially when that transport involves international shipping. Sellers or exporters can make use of the coverage to protect themselves from a number of unfortunate incidents such as the sinking of a ship, hijacking of the transport vessel, or even damage due to heat or humidity during the shipment process. Depending on the scope of the coverage, even something as simple as the freight being rearranged during transport and sustaining damage may be covered. Essentially, any losses that result from negligence or issues outside the control of the exporter may be offset by the benefits from the cargo insurance.


Buyers or importers also benefit from the use of cargo insurance. Since the value of the goods are protected, this means that even if they arrive at the port of destination in damaged condition, there is the opportunity to file a claim and eventually have those goods replaced. This approach also makes it easier to recoup any funds that have already been paid to the exporter, such as when the goods are one of a kind and cannot be replaced. From this perspective, cargo insurance covers the interests of both the buyer and seller and helps to minimize the losses that can occur when the covered goods are lost, stolen, or damaged during transit.

Typically, the seller or exporter will secure the cargo insurance and bundle the cost into the total amount charged to the buyer, along with shipping charges and other ancillary fees and costs. At times, a buyer or importer may secure cargo insurance to protect a shipment, especially if the seller prefers to use other types of insurance in lieu of cargo marine coverage. Doing so may cost the buyer a little more, but the benefits that are provided in the event something is wrong with the goods when they reach port are usually considered worth the expense.


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