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Anyone with experience in shipping knows that although the vast majority of consignments get to their destination safely, unforeseen events can wreak havoc with logistics.

Cue cargo insurance.

Like any insurance, it’s an expense you never want to use… But what exactly is cargo insurance? Is it really necessary?

We find out in this blog. 

What Is Cargo Insurance?

A shipment isn’t complete until the goods get signed off at their destination. Cargo insurance policies protect businesses that import or export goods from financial losses when things go wrong during the journey.

Coverage varies between providers, but cargo insurance is designed to provide cover against loss, damage and theft of goods during transit, as well as delayed shipment costs and non-delivery by a carrier. Cargo insurance also covers delays caused by unforeseen events such as natural disasters and force majeure. 

There are different types of cargo insurance available, and choosing the right one is vital to get the coverage you need to protect your goods in transit. 

What Are The Types Of Cargo Insurance?

Like other forms of insurance, cargo policy coverage varies. So before signing off on a shipping contract, it’s important to have a good understanding of the differences that exist. 

There are three main types of cargo insurance based on the mode of transport…

Land or Haulier

As the name suggests, this type of insurance covers your goods whilst they are being transported on land via train, truck or other utility vehicle. 

Land cargo insurance covers things like theft, road or rail accidents, collisions and the overturning of a vehicle. If your goods are perishable or hazardous, additional coverage may be required to cover losses due to specialist containers and systems that stop working.


Air cargo insurance covers shipments travelling by aeroplanes or other cargo aircraft and deals with loss or damage due to bad weather, turbulence, loading and unloading or other problems that occur in transit. 

Perishable, delicate or hazardous goods may again require extra coverage. 


You’ll need marine cargo insurance if your goods are travelling by container vessel. 

Problems with loading or unloading that cause loss or damage are again covered, as well as bad weather and other accidents while at sea. Piracy is also covered when you use marine cargo insurance. 

And just like air and land insurance, additional coverage should be added for special goods. If the nature of your consignment is fragile, hazardous or perishable, don’t forget to protect it fully. 

Levels Of Cover

In addition to covering the mode of transport, you can also select a level of cover depending on your requirements. 

All Risk

All risk coverage policies are broad. They cover the most common perils that might lead to loss or damage to your goods and should be used for general consignments. 

However, despite its name, this form of insurance comes with several exclusions. With an all-risk policy, your goods are not protected against:

  • Force majeure events such as war, pollution, pandemic and natural disasters
  • Cargo abandonment
  • Customs rejection
  • Negligence during transit
  • Environmental conditions damaging your goods
  • Non-payment or failure to collect 
  • Loss due to the nature of cargo (for example, spoiled goods)

And for each mode of transport, there are specific exclusions, too. For example, if your goods are travelling in an aeroplane they aren’t covered against loss caused by fluctuating air temperature.

Named Perils

With a named perils cargo insurance policy, your goods are only protected against the perils named in the policy. The coverage is very specific. Depending on the mode of transport, a policy with named perils coverage could include:

  • Bad weather
  • Fire
  • Theft
  • Earthquake
  • Derailment
  • Vessel collision
  • Non-delivery

General Average

This type of cargo insurance is specific to goods travelling on the water.

If an emergency were to occur at sea, a ship could jettison some cargo to preserve life or other remaining shipments. When general average is declared, ocean carriers are not liable for the loss – every cargo owner of goods on that vessel is, with each required to pay towards the losses of the affected parties.

This could mean paying out to a business that lost its container during a storm even though yours was received safely. 


Benefits Of Cargo Insurance

The huge benefit of cargo insurance is that you minimise financial loss in the event of unforeseen circumstances. 

Although the majority of shipments get from A to B successfully in transit, your freight is at risk of damage or loss for a variety of reasons. And though carriers sort out the logistics of getting your consignments to their destination, the liability policies they hold are rarely enough to cover the value of any lost or damaged freight.

Investing in the correct type of cargo insurance for the goods you import or export, therefore, provides peace of mind and protects your cash flow.

Factors Affecting The Cost

There are four main factors that influence the cost of your cargo insurance.

Type Of Goods

Products that are fragile, hazardous, valuable or perishable will come up against higher insurance costs because they often require specialist handling, packing and attention in transit – and this comes at a price.

Goods incurring more expensive cover include:

  • Perishable items
  • High-value electronics
  • Hazardous materials.

Not sure what we mean by hazardous? Check out this blog

Type Of Cover 

If you run a busy shipping business, you’ll want to go for annual coverage.

Annual coverage enables shippers to import and export goods under one policy throughout the year and works out cheaper than purchasing cargo insurance for each shipment.

For businesses that ship infrequently, shipment-by-shipment coverage works well. 

Shipping Route

Some shipping routes are more dangerous than others or come with a higher risk of bad weather or other potential barriers to getting goods to their destination safe and sound. 

Political instability and treacherous terrain are both elements that are taken into consideration by insurers, as well as areas well-known for piracy.

Loss History

Similarly to the throes of car insurance, if you have filed claims against lost or stolen cargo before, these will be taken into account when you apply for coverage. 

It works the same way. Lots of prior losses or thefts mean your shipping business is a risky one to insure, as the insurance company is more likely to have to pay out when things go wrong. Businesses should undertake strict and meticulous risk management practices like proper packaging to reduce the likelihood of making a claim. 

Arranging Cargo Insurance

You might wonder who is responsible for arranging cargo insurance. If you use a freight forwarder, they’ve got everything covered, right?

Not quite. If you choose to use a forwarder, they will have cover in place, but it can be fairly limited. This means that if something goes wrong and you need to make a claim but the value of your goods exceeds their policy coverage, you’ll see a loss. 

For that reason, separate cover should be considered if your cargo exceeds what is covered by your freight forwarder. It’s also good to cover loss of profit in the event of damage or loss to your cargo.

Millennium regularly helps clients understand cargo insurance and supports them you arrange the coverage they need for the goods they’re shipping. 


No one likes paying for insurance, but without it, your shipping business could see big losses and a messy cash flow if something goes wrong with a consignment in transit. 

Are you struggling to work out the type and level of cargo insurance you need? You’re not alone; insurance can be complicated. Give Millennium a call today for expert advice and guidance.