Most international shippers believe their cargo is covered if something goes wrong in transit. In reality, carrier liability - the default coverage provided by shipping lines and airlines - is limited to a fraction of your cargo's commercial value, subject to strict conditions, and riddled with exclusions that many shippers don't discover until they try to file a claim. Cargo insurance is the solution, and understanding how it works is essential before your next shipment leaves the warehouse.
Carrier Liability vs Cargo Insurance
Carrier liability is the shipping line's or airline's legal responsibility for loss or damage to your cargo under the contract of carriage. The problem is that this liability is extremely limited:
- Ocean freight (Hague-Visby Rules): Liability is capped at SDR 2 per kilogram or SDR 666.67 per package - whichever is higher. For a 1,000 kg shipment of electronics, this translates to roughly USD 2,700 maximum - a fraction of the actual cargo value.
- Air freight (Montreal Convention): Liability is capped at SDR 22 per kilogram - similarly inadequate for high-value cargo.
- Exclusions: Carriers routinely exclude liability for inherent vice, improper packaging, force majeure, and acts of God. Many of the most common causes of cargo damage are excluded from carrier liability.
What All-Risk Cargo Insurance Covers
A standard "all-risk" marine cargo insurance policy (Institute Cargo Clauses A) covers loss or damage from any external cause unless specifically excluded. Core coverage includes:
- Physical loss or damage from accidents during loading, transit, and unloading
- Theft and pilferage
- Water damage (including seawater ingress)
- Fire and explosion
- General average contributions
- Jettison (cargo thrown overboard in an emergency)
Coverage is warehouse-to-warehouse - from the moment cargo leaves the seller's warehouse to the moment it arrives at the buyer's destination warehouse, covering all modes of transport in between.
Common Exclusions to Watch For
- Inherent vice: Damage caused by the natural properties of the cargo itself (spoilage of perishables due to natural deterioration, not temperature failure).
- Improper packaging: Damage attributable to inadequate packaging is typically excluded. This places responsibility on the shipper to ensure goods are packed for the rigors of international transit.
- Delay: Financial losses caused by late delivery are generally excluded from standard cargo insurance. Only physical loss or damage is covered.
- War and strike: Standard policies exclude war, strikes, riots, and civil commotions - though these can be added by endorsement (SRCC coverage).
How to File a Cargo Insurance Claim
- Note the damage at delivery: Any visible damage or shortage must be noted on the delivery receipt before you sign. Unconditioned receipt limits your claim options.
- Notify your insurer immediately: Most policies require notification within a specific timeframe after discovery of loss. TMG files notifications on behalf of clients as soon as we're informed of a loss.
- Preserve the cargo: Don't dispose of damaged goods before the insurer's surveyor has inspected them. Photography of the damage, original packaging, and stowage position is essential evidence.
- Gather documentation: Commercial invoice, packing list, B/L, delivery receipt with damage noted, and survey report.
- Submit the claim: TMG prepares and submits claim documentation on behalf of clients and manages the insurer's response throughout the settlement process.
Getting the Right Coverage Through TMG
TMG arranges all-risk cargo insurance for every shipment we manage, at coverage levels matched to the declared commercial value. Our team handles the policy, the certificate, and the claims process - so you're protected without the administrative burden of managing insurance independently.