Marine Cargo Insurance for Exporters and Importers: Cover, Cost and Claims

Containers fall overboard, cargo gets wet, cartons are crushed or stolen, and a ship in trouble can declare general average and ask every cargo owner to contribute. A carrier's liability is limited, so without cargo insurance the owner of the goods usually carries most of the loss. Here is how marine cargo insurance works for both sellers and buyers.

Who insures under each Incoterm

Incoterm	Who should insure the main voyage
EXW, FCA, FOB, FAS	Buyer
CFR, CPT	Buyer (the seller pays freight but not insurance)
CIF	Seller must insure, minimum ICC (C)
CIP	Seller must insure, ICC (A) under Incoterms 2020
DAP, DPU, DDP	Seller (it carries the risk until delivery)

Even when the buyer insures, the seller can lose money if goods are damaged before the risk passes, for example on the truck to the port. Many exporters keep their own cover for that inland leg. See Incoterms 2020 explained.

ICC (A), (B) and (C)

• ICC (A) covers all risks of loss or damage except listed exclusions, such as wilful misconduct, ordinary leakage or wear, insufficient packing, inherent vice and delay. It is the right choice for most manufactured goods.
• ICC (B) covers named perils such as fire, sinking, collision, jettison, earthquake and water entering the vessel or container.
• ICC (C) covers a shorter list of major casualties only, and is the minimum for CIF.

War and strikes risks are added with separate clauses. If the buyer's bank or contract asks for a specific cover, follow it exactly, because a letter of credit will reject an insurance document that does not match.

Insured value and premium

The customary insured value is the CIF value plus 10%, to cover the buyer's expected profit and costs. The premium depends on the goods, packing, route, cover and your claims history, and is usually a small fraction of the cargo value. Fragile goods, high-theft products and long multi-modal routes cost more to insure.

Single policy or open policy

A specific (single transit) policy covers one shipment and suits occasional exporters. An open policy or open cover insures every shipment in a period automatically: you declare each shipment and the insurer issues a certificate. It saves time and avoids the risk of forgetting to insure a shipment. Indian general insurers and international insurers offer both.

General average

When a ship's master sacrifices cargo or incurs extraordinary costs to save the voyage, for example after a fire, every cargo owner must contribute in proportion to the value of their goods before the cargo is released. Insurance pays the contribution or provides the guarantee. Without insurance, you may have to pay a large cash deposit to get your own undamaged goods back.

How to make a claim

1. Inspect the cargo on arrival and note any damage or shortage on the delivery receipt. Do not sign a clean receipt for damaged goods.
2. Inform the insurer or its local agent at once and ask for a survey before you dispose of anything.
3. Lodge a written claim against the carrier or port within the time limits, to protect the insurer's recovery rights.
4. Send the insurance certificate, invoice, packing list, bill of lading, survey report and claim bill to the insurer.

Cargo insurance and credit insurance are different

Cargo insurance protects the goods in transit. If you are worried about the buyer not paying, that is credit risk, covered by export credit insurance such as ECGC. Many exporters need both.

Frequently asked questions