What Is Cargo Insurance? Freight Insurance Guide
Cargo insurance (freight insurance) protects goods against damage, loss, and theft during road, sea, air, or rail transport. Carrier liability is limited, making separate cargo insurance essential for valuable shipments.
What Is Cargo Insurance?
Cargo insurance (also called freight insurance or marine insurance) protects goods against damage, loss, and theft during transport by road, sea, air, or rail. It is separate from and additional to carrier liability, which is legally limited under conventions like CMR (road) and Hague-Visby (sea).
Under CMR Convention, carrier liability is capped at approximately 10 EUR per kg. For a 50 kg washing machine worth 5,000 EUR, CMR would only cover 500 EUR. Cargo insurance bridges this gap by covering the full value.
According to Lloyd's of London, the global cargo insurance market exceeds $30 billion annually. Kolay Parsiyel offers cargo insurance options for all shipments.
Insurance Coverage Types (ICC Clauses)
| Risk | ICC-A (All Risks) | ICC-B | ICC-C |
|---|---|---|---|
| Fire, explosion | Covered | Covered | Covered |
| Vessel sinking, grounding | Covered | Covered | Covered |
| Collision, overturning | Covered | Covered | Covered |
| Earthquake, volcanic eruption | Covered | Covered | Not covered |
| Seawater damage | Covered | Covered | Not covered |
| Theft | Covered | Not covered | Not covered |
| Breakage, crushing | Covered | Not covered | Not covered |
| Rain, water damage | Covered | Not covered | Not covered |
ICC-A provides the broadest all-risks coverage. Under Incoterms 2020, CIP requires minimum ICC-A; CIF requires minimum ICC-C.
Premium Calculation
Cargo insurance premiums depend on:
- Cargo value: CIF or CIF+10% (insured amount)
- Cargo type: Fragile, perishable, or hazardous cargo pays higher premiums
- Route: Higher-risk routes incur higher premiums
- Transport mode: Sea has highest premiums; air has lowest
- Coverage level: ICC-A is most expensive; ICC-C is cheapest
Average premium rates: ICC-A 0.5-1.0%, ICC-B 0.3-0.7%, ICC-C 0.2-0.5% of cargo value.
Claims Process
- Inspect on delivery: Check cargo for damage at handover
- Document damage: Take photos and prepare a written report with the carrier
- Notify insurer: File a claim within 3 business days
- Submit documents: Invoice, insurance policy, transport document, damage report
- Assessment: Insurer sends a surveyor to evaluate damage
- Settlement: Compensation paid, typically within 1-3 months
Frequently Asked Questions
Is cargo insurance mandatory?
Not legally required (except under CIF and CIP Incoterms). However, strongly recommended for valuable shipments because carrier liability is limited.
How much does cargo insurance cost?
ICC-A coverage costs approximately 0.5-1.0% of cargo value. For a 10,000 EUR shipment, the premium is approximately 50-100 EUR.
Can I get insurance through Kolay Parsiyel?
Yes, Kolay Parsiyel offers cargo insurance options for all shipments. Insurance is presented as an option during the quote stage.
Does insurance cover all damage?
ICC-A covers all risks except specifically excluded perils (war, nuclear, natural wear). Narrower coverage (ICC-B/C) excludes theft, breakage, and other risks.
References
- Institute Cargo Clauses (ICC)
- Lloyd's of London
- CMR Convention
- Hague-Visby Rules
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