Demystifying cargo insurance and liability insurance

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The difference between cargo and liability insurance

Cargo insurance covers all risks of physical loss or damage to cargo, indemnifying the cargo owner for the full value of the goods. Liability insurance, on the other hand, is negligence-based and limited either by convention or by contract, protecting the freight forwarder rather than the cargo owner.

Why is so much cargo shipped uninsured?

It is estimated that up to 90% of cargo along some trade lanes is shipped uninsured. The reasons for this include:

  1. Risk perception: Many cargo owners have little concept of the risks involved in international shipments.
  2. Misconceptions: Cargo owners may assume the freight operator insures the goods.
  3. Cost: While not prohibitive, the cost of cargo insurance may deter some from purchasing it.
  4. Ease of access: The process of obtaining cargo insurance can be overwhelming for some.
  5. Risk appetite: Some cargo owners may be willing to take the risk, especially if they haven't experienced losses in the past.

The benefits of cargo insurance

Cargo insurance can protect the cargo owner from bearing the full financial burden in case of loss or damage. It can also provide necessary guarantees or securities in case of general average, avoiding significant cash deposits or impacts on the company's finances.

Types of cargo insurance

  1. Institute Cargo Clauses (ICC) B: A perils-based cover that also covers the total loss of packages lost overboard during the voyage or loading/unloading.
  2. Institute Cargo Clauses (ICC) C: A basic level of cover, primarily for fire and damage due to the vessel capsizing or sinking, and general average contributions.
  3. Institute Cargo Clauses (ICC) A: The most comprehensive level of cargo insurance, covering all risks of physical loss or damage, including theft, water damage, loading/unloading losses, and piracy.

Promoting cargo insurance

Freight operators can act as agents of insurers and promote cargo insurance to their customers, protecting both the cargo owner and the commercial relationship in case of a loss. Providing access to cargo insurance platforms can simplify the process and ensure customer satisfaction.


While cargo insurance is not mandatory, it can provide valuable protection for cargo owners and prevent potential commercial friction in case of losses. Freight operators should educate their customers on the risks of not having cargo insurance and consider promoting cargo insurance solutions to protect their business relationships.

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Mike Yarwood

TT Club