Cargo insurance protects the goods being transported, not the cost of transport itself. It covers the cargo owner - usually an exporter, importer, or manufacturer- against financial loss caused by damage, theft, or other transit-related risks.

Whether the goods are travelling by road, rail, air, or sea, marine cargo insurance ensures compensation if something goes wrong during the journey.

The main purpose of the goods insurance policy is to shield cargo owners from loss or damage to their goods while in transit. It provides coverage throughout the entire supply chain, from the time goods leave the warehouse until they reach their destination.

• What Cargo Insurance Covers

• Covers accidental damage that may occur while goods are in transit.

• Protects against theft or pilferage during transportation.

• Includes losses caused by fire or explosions en route.

• Covers damage during loading and unloading, a common risk in shipping.

• Offers protection against natural calamities such as storms, floods, and other sea-related perils.

• Who Buys Cargo Insurance?

• Exporters and importers

• Manufacturers

• Logistics companies offering added coverage

• E-commerce sellers shipping goods internationally

• Cargo Insurance is Best For

Cargo insurance is best for exporters, importers, manufacturers, and e-commerce sellers who need protection against loss or damage during transit. It offers essential coverage for high-value, fragile, or perishable goods shipped across land, sea, or air.

• Exclusions in Cargo Insurance

• Willful misconduct by the insured

• Poor or inadequate packaging

• Delays in transit

• Natural wear and tear

• War, strikes, or riots (unless separately included)

A freight insurance policy protects the financial liability of carriers such as shipping lines, trucking companies, and freight forwarders. It does not insure the actual value of the cargo. Instead, it covers the carrier's legal responsibility for goods under their care.

If the goods get damaged or lost due to the carrier’s fault, this insurance helps pay compensation within predefined legal limits.

Freight shipment insurance is designed to cover the carrier's responsibility when handling third-party cargo. It protects against claims arising from accidental damage, loss, or negligence during transit.

What Freight Insurance Covers

• Covers the carrier’s legal liability if goods are damaged or lost while under their care.

• Provides protection when there is proven negligence by the carrier during handling or transit.

• Offers compensation based on legal limits, which are often much lower than the full value of the cargo.

• Helps carriers manage risk and meet their responsibilities under transport laws and contracts.

Who Buys Freight Insurance?

• Shipping lines

• Freight forwarders

• Trucking companies

• Air cargo carriers

• Transport and logistics businesses

Freight Insurance is Best For

Freight insurance, as a part of marine insurance, is best suited for shipping lines, freight forwarders, and transport companies. It protects them against legal claims arising from goods lost or damaged while in their custody.

The coverage focuses on the carrier’s liability, not the cargo’s value, and forms a key component of risk management in marine transport operations.

Exclusions in Freight Insurance

• Events not caused by carrier negligence

• Acts of God, like storms or floods

• Inherent defects in goods (inherent vice)

• Poor packaging by the shipper

• Damages excluded by contract terms between the carrier and the customer

Also Read: What Are the Requirements to Buy a Marine Insurance Policy?

Also Read: Difference between FOB and CIF

• Your Role in the Supply Chain- If you are an exporter, importer, or cargo owner, choose cargo insurance. Carriers and logistics companies need freight insurance.

• Type of Risk A Business Wants to Cover- Cargo insurance covers physical loss or damage to goods. Freight insurance covers only the carrier’s legal liability.

• Claim Process and Payout Limits- Cargo insurance allows direct claims and offers full-value compensation. Freight insurance requires proof of carrier negligence and pays limited amounts.

• Nature of the Goods- For high-value, fragile, perishable, or sensitive goods, cargo insurance offers wider protection than freight liability policies.

• Transit Mode and Distance- Longer or international routes carry higher risks. Cargo insurance is better suited for global trade with multi-mode transport.

• Contract Terms with Buyers or Clients- Check if the sales or shipping contract demands cargo insurance or requires the carrier to be insured.

• Budget and Risk Appetite- If full protection matters more than cost, choose cargo insurance. If you are a carrier managing risk, a freight policy is a legal must.

• Best Practice- Many businesses use both cargo insurance to protect goods and freight insurance to manage legal liability.

For Exporters, Importers, and Sellers

Cargo insurance is the right choice as it protects the full value of goods during transit. It covers risks like theft, damage, fire, pilferage, and natural disasters. Claims can be made directly without proving the carrier's fault.

Freight insurance alone is not sufficient, as it only covers limited legal liability.

For Logistics Companies and Carriers

Freight insurance is essential, as it protects against claims when goods are damaged in their custody. It is often legally required for freight forwarders, shipping lines, and trucking firms.

Cargo insurance may be optional unless offered to clients as an added service.

For High-Value or Fragile Shipments

Cargo insurance is strongly recommended for expensive, delicate, or time-sensitive goods. It provides broader protection compared to freight insurance.

Combined cargo and freight policies may be recommended for full financial protection across the supply chain.

**When to Consider Both Cargo Insurance and Freight Policy

Many businesses opt for combined coverage:

• Cargo insurance for the goods themselves.

• Freight insurance for carrier legal liability.

The choice between cargo and freight insurance depends on your role, the value of goods, risk exposure, and responsibility during transit. Each policy serves a unique purpose and may complement the other for complete protection.

• Choosing freight insurance, assuming it covers cargo loss- Many businesses mistakenly believe freight insurance protects the actual goods, when it only covers the carrier’s liability, leaving cargo owners underinsured.

• Underinsuring high-value shipments- Some companies declare lower cargo values to reduce premiums, which results in significantly reduced claim payouts during loss or damage.

• Not checking policy exclusions or limitations- Overlooking exclusions in marine and cargo insurance related to poor packaging, delays, or natural wear and tear often leads to claim rejection.

• Assuming general liability policies cover transit risks- Standard business liability policies do not protect goods while they are in transit, creating unexpected gaps in coverage.

• Not aligning insurance with contractual responsibilities- Ignoring contract terms or Incoterms can lead to confusion or disputes about who was responsible for insuring the shipment at each stage of transit.

Premiums for both policies are risk-based. Understanding these factors helps businesses plan better and choose the right coverage at the right price.

Factors Impacting Cargo Insurance Premium

• Type of Cargo- Fragile, perishable, or high-value goods usually attract higher premiums due to increased risk.

• Packaging Quality- Well-packed goods may lead to lower premiums, while poor packaging increases the chance of damage and raises costs.

• Transit Route- Longer or high-risk routes, such as politically unstable areas or piracy zones, may result in higher premiums.

• Mode of Transport- Airfreight is typically safer and may have lower rates than sea or road transport, which carries higher risk exposure.

• Trade Terms (Incoterms)- Incoterms like CIF or FOB define who bears the marine insurance cost, which can influence the premium structure.

Factors Impacting Freight Insurance Premium

• Nature of Carrier Service- Carriers transporting hazardous or high-risk goods may pay more for insurance.

• Liability Limits- Higher liability coverage demands higher premiums, especially when exceeding standard legal caps.

• Fleet Size- Larger fleets may benefit from better pricing due to economies of scale and risk distribution.

• Claims History- A clean claims record helps reduce premiums, while frequent or large claims lead to increased rates.

Documents Needed for Buying Cargo Insurance

• Commercial invoice showing the value of goods

• Packing list with item details and quantities

• Bill of lading, airway bill, railway receipt (if available before shipment)

• Shipping details such as origin, destination, and transit route

• Description of cargo, including type, nature, and packaging

• Past claim history (if applicable)

• Insurance proposal form, filled out and signed

• Trade terms (Incoterms) agreed between buyer and seller.

Documents Needed for Buying Freight Insurance

• Business registration documents of the carrier or logistics company

• Transport licence or permits (for trucking, shipping, or freight forwarding)

• Details of services offered (road, sea, air, multimodal)

• Fleet details, including vehicle or vessel information

• Liability limit requirements as per contracts

• Past claims record

• Carrier contracts or service agreements

• Completed insurance proposal form

Also read: What are the Documents Required for Import-Export Customs Clearance

Choosing between cargo and freight insurance depends on your role, risk exposure, and the value of your goods. Cargo insurance offers broader protection, while freight insurance covers limited liability. Many businesses choose both policies to ensure complete coverage across the supply chain.

At TATA AIG, we offer customised marine cargo insurance solutions to meet the needs of businesses across industries. Whether you ship high-value goods by air, road, or sea, our policies protect you from unforeseen losses. You can easily purchase marine insurance online, with flexible coverage options tailored to your trade terms, transit routes, and packaging standards.

We also help simplify the process of getting shipment insurance, with transparent documentation, expert support, and quick claim settlements. Our platform makes managing your cargo insurance fast, reliable, and hassle-free.
Secure your shipments with confidence. Explore TATA AIG plans to purchase marine insurance online for your business today.