Freight insurance (cargo insurance) covers the financial loss if your shipment is damaged, lost, or destroyed during transit, typically costing a small percentage of cargo value — often in the range of 0.3–0.5%, though the exact rate depends on cargo type, route, and coverage level. It's a relatively small cost against the real financial exposure of an uninsured shipment being damaged or lost at sea.
Standard cargo insurance covers physical loss or damage from events like vessel sinking, fire, collision, and rough handling during transit. Broader "all risks" coverage extends further, covering most causes of physical loss or damage except a specific list of exclusions. What it doesn't typically cover: delay-related losses (like a missed sales window), inherent product defects unrelated to transit, and losses from inadequate packaging, which is usually considered the shipper's responsibility, not a transit risk.
Ocean carriers do carry some liability for cargo loss under international conventions, but that liability is typically capped at a fairly low amount per package or per kilogram — nowhere near full cargo value for most shipments. A buyer relying on carrier liability alone, assuming it functions like insurance, is usually badly underprotected relative to what a shipment is actually worth.
Whether the buyer or seller arranges insurance depends on the Incoterm governing the shipment. Under CIF (Cost, Insurance, and Freight), the seller is contractually required to arrange minimum coverage. Under FOB (Free On Board) and most other terms, the buyer is responsible for arranging their own coverage from the point risk transfers. See our full breakdown of Incoterms for exactly where risk and responsibility shift under each term.
Even when a seller is required to arrange minimum coverage under CIF, that minimum is often a basic tier that may not reflect a shipment's full value or your specific risk tolerance. For high-value cargo, or shipments on routes with elevated risk, arranging additional coverage independently — rather than relying solely on a counterparty's contractual minimum — is a reasonable and common practice.
Filing a successful cargo insurance claim depends on documentation prepared before the loss occurs, not just afterward. Clear photographs of goods before shipment, an accurate declared value matching your commercial invoice, and prompt notification to the insurer once damage or loss is discovered all matter to how smoothly a claim gets processed. Buyers who treat insurance as a formality they don't expect to use often discover, at the worst possible moment, that they're missing the documentation a claim actually needs.
It's worth reading the policy's specific exclusions before a shipment, not after a loss. Packaging-related exclusions in particular catch buyers off guard — if an insurer determines packaging was inadequate for the transit method, that alone can be grounds to deny an otherwise valid claim.
Comparing quotes from more than one insurer is worth the small amount of extra time it takes, since rates and exact coverage terms can vary meaningfully for what looks like the same basic policy on paper.
Who pays for what and who bears risk at each stage of a shipment, in plain language.
Trade Terms & ComplianceA receipt, a contract of carriage, and a document of title, all in one document.
Sea Freight & LogisticsHow order volume, cost per unit, and transit time should decide which container shipping method you use.
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