Cargo insurance
Cargo insurance for shipments from China
Most importers assume the shipping line pays if a container is lost or damaged. Usually it doesn't, or not much. Here's what carrier liability really covers, how general average works, and when cargo insurance is worth buying.
- US ocean carrier liability
- $500 per package
- Recommended cover
- All-risk (Institute Cargo Clauses A)
- Usually insured for
- Invoice + freight + 10%
Updated
Why carrier liability isn't enough
Carriers are liable for loss or damage only in limited circumstances, and only up to amounts set by international conventions and US law:
| Mode | Typical limit of carrier liability |
|---|---|
| Ocean, US imports (COGSA) | $500 per package, or per customary freight unit |
| Ocean, Hague-Visby rules | About 667 SDR per package or 2 SDR per kg, whichever is higher |
| Air (Montreal Convention) | About 26 SDR per kg |
For a container of electronics, "per package" can mean per pallet, so a $60,000 shipment on 10 pallets might be limited to $5,000. Carriers are also not liable at all for many causes of loss, such as navigational error, fire, or perils of the sea. Even when they are liable, you may have to prove fault and wait a long time to be paid.
General average: the risk most importers have never heard of
When a ship's owner makes a deliberate sacrifice or incurs extraordinary costs to save the voyage — firefighting, salvage, refloating a grounded vessel — maritime law lets the owner declare "general average". Every cargo owner on board then has to pay a share of those costs, in proportion to the value of their cargo, before their goods are released.
This happens more often than you might think: the container ship Dali, which struck Baltimore's Francis Scott Key Bridge in 2024, is a recent example of a vessel whose owner declared general average. Without insurance, an importer may have to put up a cash deposit or bond to get their goods released, even if their cargo wasn't damaged at all. With insurance, the insurer provides the guarantee.
Types of cover
| Cover | What it protects against |
|---|---|
| Institute Cargo Clauses (A) — "all risks" | Loss or damage from any external cause, apart from listed exclusions |
| Institute Cargo Clauses (B) | Named perils, including fire, sinking, collision, and seawater entering the container |
| Institute Cargo Clauses (C) | A narrower list of major casualties such as fire, sinking and collision |
All-risk cover is the sensible default for most cargo. Note that CIF quotes from suppliers usually include only the minimum (C) level of cover — see Incoterms explained.
Even all-risk policies have exclusions. The common ones are poor or insufficient packing, inherent vice (goods deteriorating on their own), delay, ordinary wear, and loss of market. Good export packing is part of being insured.
What it costs and how much to insure for
Premiums depend on the commodity, its value, the route and the packaging, but for general merchandise all-risk cover is often a fraction of one percent of the insured value. Fragile, high-theft or high-value goods cost more.
The usual convention is to insure for the invoice value plus freight, plus 10% to cover the incidental costs of a loss. That way a total loss pays back what the goods actually cost you to land, not just what you paid the factory.
If something goes wrong
Note it on delivery
If cartons are visibly damaged, write it on the delivery receipt before signing, and photograph everything before unloading further.
Keep everything
Don't throw away damaged goods or packaging until the insurer says you can. Surveyors often need to inspect them.
Notify quickly
Tell your forwarder and insurer straight away. Ocean carriers must normally be notified of visible damage at delivery, or within three days if it wasn't apparent.
Send the documents
Usually the commercial invoice, packing list, bill of lading, delivery receipt, photos, and a repair estimate or proof of loss.
FAQ
Cargo insurance: common questions
The questions importers ask us before the first booking. If yours is not here, ask us directly — a real coordinator replies, not an auto-responder.
Is cargo insurance required when shipping from China?
It isn’t legally required, but without it you depend on carrier liability, which is limited — $500 per package for US ocean imports — and doesn’t apply to many causes of loss.
Doesn’t the shipping line pay if my container is lost?
Only if the carrier is legally liable, and only up to the limits set by law and convention. Many causes of loss, including fire and perils of the sea, are excluded.
What is general average?
When a ship’s owner incurs extraordinary costs to save the voyage, every cargo owner on board must contribute a share before their goods are released — even if their own cargo is undamaged. Insurance covers this contribution.
How much should I insure my shipment for?
Commonly the invoice value plus freight, plus 10%. That covers what the goods cost you to land and the extra costs of dealing with a loss.
Does CIF include insurance?
Yes, but only the minimum level of cover required by Incoterms 2020 for CIF, Institute Cargo Clauses (C). Many importers add their own all-risk policy.