Cargo insurance is critical when it comes to the shipping and transportation industry. Given the risks associated with transporting goods, it makes sense that insurance plays such a huge role.

But what does cargo insurance cover? You’re not alone in asking this. It can be difficult to know what you need in your policy and how to secure the right coverage for your needs. Luckily, insurance is our forte. Let’s break down exactly what cargo insurance covers and how to ensure you are protected.

What is cargo insurance?

Cargo insurance is a specialised policy to protect businesses from financial losses due to damaged or lost goods while in transit. That means:

  • It covers the value of the cargo
  • It compensates the owner in case of mishaps that occur during shipping

The logistics industry is inherently risky, with goods exposed to a range of dangers like accidents, natural disasters, theft, and handling errors… to name a few. Cargo insurance is the safety net to ensure businesses can recover financially in the event of such losses. Operations can continue, financial health is safeguarded, and reputation is maintained.

It’s vital for a wide range of businesses across different sectors. Manufacturers rely on it to protect their goods from factory to marketplace. Wholesalers and distributors need it to cover products during storage and transit until they reach retailers or consumers. Transportation companies need it to protect their clients’ goods and manage their liability.

Essentially, if you’re moving goods, you need cargo insurance.

The scope of cargo insurance coverage

Cargo insurance is designed to provide comprehensive protection against a range of risks. Understanding the scope of your coverage is essential to ensure you have a policy that matches your specific needs and the nature of your cargo.

So what does cargo insurance cover?

  • Loss or damage due to accidents during transit: This is the core of cargo insurance. It covers goods against loss or damage as a result of an accident during transportation. This includes collisions, overturning, or other mishaps that can happen on the road, in the air, or at sea.
  • Theft, piracy, hijacking: This is particularly important for high-value goods or shipments that travel through high-risk areas.
  • Weather-related damages: Goods in transit are exposed to the elements and can be damaged by severe weather like storms, floods, or hurricanes. Cargo insurance can protect against that.
  • Handling and storage issues: Damage can also happen during loading, unloading, and temporary storage in transit. Cargo policies usually cover this.

Common exclusions or limitations of cargo insurance

While cargo insurance provides broad coverage, it’s important to know the common exclusions or limitations in standard policies.

  • Inherent vice: This refers to loss or damage due to the natural properties of the goods themselves. For example, perishables spoiling over time is generally not covered.
  • Improper packing: If the goods aren’t packed properly for transit, resulting damage might not be covered.
  • Willful misconduct: Losses that arise from the intentional misconduct of the insurance party are typically excluded from coverage.
  • Delayed voyage: Most cargo insurance policies don’t cover losses due to delays, even if those delays result in financial loss.
  • War and strikes: While some policies might offer coverage against strikes, riots, and civil commotions, losses due to warlike operations are usually excluded.

Types of cargo insurance policies

When it comes to safeguarding goods in transit, not all cargo insurance policies are created equal. The right choice depends on the nature of the goods, the routes taken, and the specific risks involved.

All-risk policies

All-risk policies offer the most comprehensive coverage and protect against all causes of loss or damage that are not specifically excluded. This means protection against theft, damage, and other unforeseen incidents during transit.

Specified perils policies

In contrast, specified perils policies cover only the risks explicitly listed in the policy. It will usually cover perils like fire, explosion, theft, and weather-related damages. 

This type of policy is usually less expensive, but it means you need to very carefully assess the risks that your cargo is most likely to encounter. If you’re less susceptible to a broad range of risks or when shipping routes are considered relatively safe, this is a great fit.

Open cover policies

Open cover policies generally provide coverage for shipments made by the policyholder over a specific period, typically a year. They’re flexible policies and automatically cover all shipments.

Single shipment policies 

This policy is good for businesses that don’t frequently ship goods, or if you’re making a one-time, high-value shipment. It covers one specific transit and takes into account the unique characteristics of that one shipment.

Choosing the right cargo insurance policy

Picking the right cargo insurance policy for you and your business requires a careful assessment of your shipping activities, the value of the goods you’re shipping, and the potential risks involved.


  • Frequency of shipments: Regular shippers might find open cover policies more convenient and cost-effective, while occasional shippers may prefer single shipment policies. 
  • Nature of goods: If you’re transporting high-value or sensitive items, you might need the broader coverage offered by all-risk policies. 
  • Shipping routes: Consider the risks associated with your specific shipping routes. Areas prone to theft or extreme weather conditions might impact the type of policy you need.  
  • Budget constraints: While comprehensive coverage is the goal, budget constraints sometimes mean you need to find a balance between your level of protection and the cost of your premiums.

Get comprehensive cargo insurance coverage

Still not sure which cargo insurance policy you need for your business? We can help with that. Navigating the complexities of cargo insurance can be difficult, and we’re dedicated to helping you find the perfect carriers liability insurance for your needs.

Contact us today to explore your options and secure the peace of mind that comes with knowing your cargo is safeguarded from departure to destination.

December 8, 2023

By Graham Knight

Founder and Managing Director of GSK Insurance (established in 1981). Graham draws upon more than 50 years’ experience in the insurance industry, working in both insurance and broking across various private, public and government sectors in Australia.

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