Ask most first-time importers whether their shipment is insured and the answer is some version of "the forwarder is handling it." Usually that means the goods move under the carrier's standard liability, which is not insurance at all. It is a statutory cap, and on a container of consumer products it is the difference between being made whole and losing a production run.
Cargo insurance is cheap — typically 0.1 to 0.5 percent of insured value on an ocean move. Understanding it still matters, because the exclusions are where importers lose money.
What the Carrier Actually Owes You
For ocean freight into the United States, the Carriage of Goods by Sea Act limits a carrier's liability to $500 per package unless you declared a higher value and paid an ad valorem rate — which almost nobody does, because the surcharge is punitive. "Package" means what the bill of lading lists. If the bill says one container, the carrier may argue the container is one package and cap the claim at $500. If it lists 800 cartons, you are far better off. That line can be worth six figures.
Elsewhere the Hague-Visby Rules cap liability at 666.67 SDR per package or 2 SDR per kilogram, whichever is greater; air freight runs under the Montreal Convention at about 22 SDR per kilogram. All are per-unit caps sized for a different era, all carry a long list of carrier defenses, and all require you to prove fault. Marine cargo insurance pays on proof of loss, not blame.
Who Is Supposed to Buy It — Read Your Incoterm
The Incoterm on your purchase order decides who carries risk at each leg and who must insure. Under CIF and CIP the seller insures — but CIF obliges only minimum cover, written for the seller's benefit with you as an assignee. Under FOB, risk passes to you at loading and nobody is obliged to insure, so an FOB shipment with no policy of your own is bare from the ship's rail onward. Under EXW you carry risk from the factory gate. If you have not mapped this out, start with FOB vs EXW vs CIF explained for importers.
The practical advice: buy your own policy, in your own name, regardless of term. It costs little, you control the claims process, and you do not depend on a foreign seller's insurer.
All Risk vs Named Perils
Marine cargo policies come in tiers, usually written on Institute Cargo Clauses.
- Clauses A — "all risk." Physical loss or damage from any external cause except what is specifically excluded. This is what you want for finished consumer goods and electronics.
- Clauses B — named perils. A defined list: fire, stranding, sinking, collision, general average sacrifice, jettison, washing overboard, water entry into the hold. Nothing outside the list is covered.
- Clauses C — minimum. A shorter list still, essentially major casualty events. This is what a CIF seller typically buys, and it is close to worthless for ordinary damage.
"All risk" is a term of art, not a promise: it means unforeseen and fortuitous external causes, not everything that can go wrong.
Warehouse-to-Warehouse Cover
A proper policy attaches when goods leave the named origin warehouse and stays attached through every transshipment and inland leg until delivery to the named final warehouse — normally with an outer limit of 60 days after discharge. That continuity matters because much cargo damage happens in handling at the ends, not on the water. Name your actual 3PL in the certificate, not just the port, and remember that cover lapses if goods sit: a container left on a yard past the limit is uninsured, and nobody will tell you.
General Average: The One That Surprises Everyone
General average is an ancient maritime principle and very much alive. If the master sacrifices cargo or incurs extraordinary expense to save the venture — jettisoning containers, salvage after a fire, an emergency port call — every cargo owner contributes proportionally, whether or not their own goods were touched. Declarations follow most major container fires and groundings, and the carrier will not release your cargo until you post a general average bond and a cash deposit, often 10 to 30 percent of cargo value. Insured, your underwriter guarantees it and the goods move. Uninsured, you write that check yourself, on undamaged goods.
How Much to Insure For
The market convention is CIF value plus 10 percent: invoice value, insurance, and freight, plus a markup for the duty, brokerage, and margin you also lose in a total loss. Some importers use CIF plus 20 percent when duty rates are high, and given how much tariffs on imports from China add to landed cost, that is often more honest. Under-insuring triggers averaging clauses that cut partial claims proportionally, so it is false economy.
The Exclusions That Kill Claims
- Insufficient packing. The single largest reason importer claims are denied. If the surveyor concludes the cartons, pallets, or dunnage were inadequate for ordinary ocean carriage, the claim fails regardless of what happened. Design packaging for the transit environment, not just the shelf — our guides on packaging design and on building a model to test packaging and transit both exist because of this exclusion.
- Inherent vice. Damage arising from the nature of the goods themselves: corrosion from residual moisture, batteries self-discharging, adhesives creeping in tropical heat. Not a fortuitous external cause, therefore not covered.
- Delay. Even when caused by an insured peril, loss of market and consequential loss are excluded. A container arriving three weeks after your promotion ended is a business loss, not a cargo claim.
- Unseaworthiness of the vessel or container, where you knew of it at loading.
- Willful misconduct of the insured, and ordinary wear, leakage, and loss of weight.
- War and strikes, excluded by default and bought back as separate clauses. Buy them; they are inexpensive and the routes that matter change quickly.
Making a Claim Stick
Note the exception on the delivery receipt before signing. Photograph the seal, its number, and the load as opened. Do not move or repair anything before survey. Give the carrier written notice immediately — three days for concealed damage in most terms — and your underwriter promptly. Claims fail on documentation as often as on coverage. If the underlying problem turns out to be the goods rather than the voyage, that is a different remedy entirely, covered in getting compensated for a defective shipment.
Projects House manages overseas production and shipping for US product companies, including packaging that survives the container and the documentation behind a shipment. If you want that handled before your next run leaves the factory, reach us through the contact form.