What Is Marine Cargo Insurance? The Complete Guide

The most expensive assumption in international trade is that the carrier insures your goods. It does not. Carriers accept limited liability under international conventions — roughly 2 SDR per kilogram under the Hague-Visby Rules for sea freight, or around $20 per kilogram under the Montreal Convention for air freight. For most commercial cargo, that covers a fraction of actual value.

Marine cargo insurance closes this gap by covering the goods themselves — regardless of whether the carrier is legally liable. This matters because many losses (heavy weather, condensation, handling damage) involve no carrier fault at all, meaning no liability claim exists to pursue.

Modern cargo policies are built on the Institute Cargo Clauses (ICC), published by the International Underwriting Association of London. Three tiers define the scope of cover:

All three clauses share the same exclusions: wilful misconduct of the insured, ordinary leakage and wear, inherent vice (the goods deteriorating on their own), delay, insolvency of the carrier, and — unless added back — war and strikes. War and strikes cover is available as separate Institute clauses and should be added for most international shipments.

A standard ICC (A) policy operates on a 'warehouse to warehouse' basis: cover attaches when the goods leave the origin warehouse for the ordinary course of transit and continues through loading, sea or air passage, discharge, and onward carriage until delivery at the final destination — subject to a 60-day limit after discharge at the destination port.

• Perils of the sea — heavy weather, stranding, sinking, collision
• Fire and explosion at any stage of transit
• Theft, pilferage, and non-delivery (with ICC A or added riders)
• Handling damage during loading and discharge
• Freshwater and condensation damage (ICC A; partial under B)
• General average contributions and salvage charges
• Both-to-blame collision clause liability

Cargo is conventionally insured at 110% of CIF value — the invoice cost plus freight and insurance, plus a 10% allowance for anticipated profit and incidental costs. This convention appears in most sales contracts and letters of credit, and UCP 600 requires at least 110% CIF cover when an LC demands insurance.

Under-insurance triggers the average clause: if goods worth $100,000 are insured for $50,000, a $20,000 partial loss pays only $10,000. Declaring full value — including freight and duty where relevant — is the cheapest risk decision in the transaction.

Cargo claims fail on procedure more often than on merit. Policies impose duties that, if breached, void recovery regardless of how clearly the loss is covered.

1. 1Give immediate notice to the insurer or claims agent named in the policy upon discovering damage or non-delivery.
2. 2Survey damaged goods before further movement — do not destroy evidence of the loss.
3. 3File a written claim against the carrier within the convention deadline (typically 3 days for apparent damage, 1 year for suit).
4. 4Collect documents: policy, invoice, packing list, bill of lading, survey report, carrier correspondence, and the claim statement.
5. 5Mitigate the loss — take reasonable steps to protect and minimize damage to affected goods.