Most shippers assume their cargo is covered the moment a carrier accepts it. It usually is not, at least not in the way people imagine. The shipping line or airline is liable for your goods, but only up to a limit that was set decades ago and is calculated by the kilogram or the package, not by what your goods are worth. This guide explains where that gap sits, when insurance genuinely matters, and when it is reasonable to ship without it.
What the carrier already covers, and why it is not much
Carrier liability is real, but it is capped, and the cap has nothing to do with the value on your invoice.
- Sea freight. Most ocean bills of lading apply the Hague-Visby Rules, which limit the carrier to roughly 666.67 SDR per package or 2 SDR per kilogram, whichever is higher. For a crate of carved furniture worth thousands of dollars, the payout can be a small fraction of that.
- Air freight. The Montreal Convention caps airline liability at around 26 SDR per kilogram. Light, valuable goods such as electronics or jewellery lose the most.
- You also have to prove fault. Weather, a fire in another container, or an act the carrier could not reasonably prevent can leave you with nothing at all.
SDR stands for Special Drawing Rights, a basket currency set by the IMF. The exact rupiah figure moves with exchange rates, but the point does not: the limit is set by weight, not value.
The risk most people have never heard of
General average is a centuries old maritime rule, and it catches uninsured shippers every year. If a vessel faces an emergency and the captain sacrifices cargo or incurs extraordinary costs to save the ship, every cargo owner on board shares the bill in proportion to the value of their goods. That applies even if your container was untouched.
Before your cargo is released at destination, you must provide a guarantee or a cash deposit for your share. An insurer provides that guarantee for you. Without cover, you pay it yourself, often before you have sold a single item from the shipment.
What a cargo policy actually covers
Marine cargo insurance is usually written on the Institute Cargo Clauses, and there are three levels.
- ICC (A). The broadest cover, sometimes called all risks. It covers loss or damage from any external cause, apart from a short list of exclusions.
- ICC (B). Named perils only, such as fire, sinking, collision, earthquake and water entering the container.
- ICC (C). The narrowest, covering major casualties like fire, sinking and collision, and little else.
If you sell on CIF terms, Incoterms 2020 only requires the seller to buy ICC (C). Under CIP the minimum is ICC (A). If you are unsure which term you are quoting on, our guide to Incoterms for first time exporters covers it.
What insurance will not pay for
Every policy excludes a few things, and the first one is the most common reason claims are refused.
- Poor packing. If the packing was not fit for the journey, the insurer can decline. Cartons that collapse under a normal stack are treated as a packing failure, not an accident.
- Delay. A late vessel is not insured loss, even if it costs you a sale.
- Inherent vice. Goods that deteriorate by their own nature, such as timber that cracks as it dries or produce that spoils.
- Ordinary wear, leakage and loss of weight.
When you genuinely need it
- The value is high relative to the weight. This is exactly where carrier liability pays the least.
- Losing the shipment would hurt your business. If a total loss means missing payroll or a buyer contract, the premium is cheap.
- The goods are fragile or irregular. Furniture, ceramics, glass and artwork.
- It travels by sea on a long lane. General average exposure alone justifies cover.
- Your buyer or your bank requires it. Letters of credit often specify cover.
When skipping it is a reasonable decision
Insurance is not always worth it, and a forwarder who says otherwise is selling.
- Low value, sturdy goods that you could replace without real damage to your business.
- Short domestic moves where the goods are robust and the value is modest.
- Your buyer is already insuring it under the agreed Incoterm. Check before you pay twice.
How much to insure for
The market standard is the CIF value plus ten percent: the cost of the goods, the freight and the insurance itself, with a margin for the costs of replacing them. Insure for less and most policies apply an average clause, which reduces any payout in the same proportion as you were underinsured. Declare the real value. Insurance only pays out on what you wrote down.
If something goes wrong
- Write the damage on the delivery note before you sign it. A clean signature is treated as proof the cargo arrived in good order.
- Photograph everything before you unpack further: the container, the seal, the outer cartons, then the damage itself.
- Notify in writing quickly. Under the Hague-Visby Rules, damage that is not visible on delivery must be reported to the carrier within three days.
- Keep the damaged goods and packing until the surveyor has seen them.
Talk to us before you book
If you are unsure whether a shipment needs cover, ask us when you request a quote and we will walk you through the trade offs for that specific cargo and route. For the other short answers on shipping from Bali, see our FAQ page, and if you are still choosing between shared and full containers, read LCL or FCL: which one is actually cheaper.
