Cargo transport insurance: coverage, deductible, exclusions

Transport conventions cap what the carrier must pay. For maritime, the Hague-Visby Rules (Brussels Convention of 1924, 1968 Protocol), applicable to the classic bill of lading, limit compensation to 666.67 Special Drawing Rights per package or 2 SDR per kilogram, whichever is higher. For air, the Montreal Convention of May 28, 1999 caps the freight indemnity at just over twenty SDR per kilogram, revised periodically by ICAO. The SDR, a basket of IMF currencies, is worth approximately 1.3 US dollars.

On a container of light and expensive goods, these caps cover a minimal fraction of the invoice. You still need to prove the damage occurred while under the carrier's custody, respect claim deadlines, and hope the company is solvent on the day of the loss. A cargo insurance policy reverses the logic: it indemnifies the agreed value, without discussion on these caps.

Marine insurance relies on the standard Institute Cargo Clauses, in their January 1, 2009 edition. Clauses C cover major perils: fire, explosion, sinking, stranding, collision, jettison, and general average sacrifice. Clauses B add intermediate named risks: entry of sea or fresh water, washing overboard, lightning, earthquake, total loss of a package falling overboard during transshipment. Clauses A, known as 'all risks', cover any fortuitous loss except for listed exclusions: this is the expected level for packaged valuable goods.

Since the ICC Incoterms 2020, a CIF seller must cover at minimum Clauses C, and a CIP seller Clauses A. Under FOB, FCA, or EXW, it is the buyer who insures and chooses the level. This legal minimum is rarely sufficient: Clauses C do not cover theft or wet damage not following a sinking.

An ad valorem policy indemnifies the value you declare, not a flat rate per kilogram. The insured value is conventionally calculated on the cost of goods plus freight, usually increased by 10% to cover ancillary costs. If you declare less than the actual value, the insurer applies the proportional rule: the indemnity is reduced in the same ratio as the underinsurance.

Do not confuse this with the ad valorem value declaration to the carrier: for a surcharge, it raises the carrier's liability cap, but it is not a policy. Also check the coverage of freight and customs duties if needed: a dedicated extension exists, useful when the loss occurs after clearance, when duties paid become definitive.

The deductible is the portion of the damage that remains your responsibility per claim. It is expressed as a fixed amount or a percentage of the insured value. An absolute deductible is systematically deducted. A relative deductible only applies if the damage exceeds its threshold: in that case, everything is indemnified. The difference changes everything on small shortages; re-read the clause.

Fragile goods often carry a higher specific deductible, because breakage is difficult to date and prevent. Packaging is not just a production matter: insufficient packaging is a classic exclusion, and an excessive deductible can make the policy almost useless for glass or ceramics. Assess premium and deductible together, never separately.

General average is an ancient mechanism, now codified by the York-Antwerp Rules 2016. When the crew voluntarily sacrifices part of the cargo to save the vessel, or incurs extraordinary expenses such as emergency towage, the loss is distributed among all saved interests proportionally to their value: shipowner, shippers, including those whose cargo was jettisoned.

The pitfall: your container may arrive intact and still trigger a contribution demand. Without a policy, the carrier blocks delivery until a guarantee is deposited and its share paid. With Clauses A, your insurer advances the general average contribution and conducts the settlement with the carrier's expert. Many importers discover this mechanism after the fact: it is a major reason to take out a policy, even on short routes.

A clauses are not a blank check. Inherent vice of the goods, insufficient or unsuitable packaging, pure delay, willful misconduct of the insured, loss of market, and consequences of nuclear radiation remain excluded. War and strikes are covered only by dedicated extensions, war clauses and strike clauses, charged according to the zones traversed.

Some goods are excluded outright or accepted only upon quotation: live animals, perishable goods, used items and vehicles, precious metals and stones. Carrier insolvency is also often excluded from standard policies. Request the list of exclusions before signing, not after a loss, and verify that your packing practices meet the contract requirements.

Our Chinese-speaking team in Guangzhou checks the packaging and supervises loading before departure: compliant packaging makes the difference between a claim that is paid and a claim rejected for insufficient packaging. As a brokerage and sourcing firm, we select with you the level of clauses suited to the goods, set the declared value, and coordinate forwarder and insurer, from ex-works price to customs clearance. If a loss occurs, we compile the file: reserves, photos, bill of lading, invoices, expert report.

In most cases, you pay no fees: you open a file, we negotiate the goods for you, and we take a commission on their ex-works value.