What’s Covered and Excluded in a Cargo Insurance Policy?

Cargo insurance policies are generally designed to provide financial protection for cargo in transit from various risks and perils.

Cargo owners can use an insurance policy to cover a wide range of incidents, including:

  • Fire and explosions
  • Theft and vandalism
  • Collision
  • Overturning or sinking
  • Derailment
  • Weather damage from a flood, storm, earthquake, or lightning strike
  • Pilferage and shortage
  • Deterioration, rot, rust, or spoil

Cargo insurance is not a standardized policy like auto and homeowners, and different policies can be customized to better match a cargo owner’s needs. Some cargo insurance policies include additional protection from extra freight costs, replacement of damaged goods by air carriage even if the original mode of transit was ground or ocean, and even general average. Many insurance agencies offer cargo insurance, but few specialize in logistics and supply chain. Partnering with a specialty cargo insurance broker ensures you are securing the right coverage.

While cargo insurance coverage spans various risks, some things are excluded from a typical insurance policy. Most cargo insurance excludes the following:

  • Intentional misconduct by the insured cargo owner
  • Losses caused by delay or loss of market
  • Losses caused by wear and tear, ordinary leakage, or ordinary loss in weight or volume
  • Losses caused by inherent vice (unless specifically covered)
  • Losses caused by war, terrorism, or nuclear events (typically war & terrorism can be added via endorsement)

Understanding the two main types of cargo insurance coverage is crucial for protecting your valuable goods during transport. Here’s a breakdown of All-Risk and FPA:


  • Broadest Coverage: This is the most popular choice, covering virtually all physical losses to your cargo except for those explicitly excluded in the policy.
  • Simplified Claims: If your cargo suffers a qualified loss not excluded in the policy, it’s likely covered. No need to prove specific perils.
  • Peace of Mind: Offers maximum protection and minimizes financial risk associated with unforeseen events.

FPA (Free of Particular Average):

  • Limited coverage that only covers specific perils listed in the policy in case of a partial loss.
  • Commonly used for bulk goods and shipments with on-deck ocean bills of lading.
  • Reduced protection for common partial losses like pilferage, breakage, and rough handling.
  All Risk FPA
Fault or errors in the management of vessel
Bursting of boilers
General Average
Heavy weather
Seawater as a result of heavy weather
Theft of entire shipping package
Non-delivery of entire shipping package
Fresh water
Improper stowage by the carrier
Hook damage, mud & grease
Rough handling

The risks involved in shipping goods are great, and so cargo insurance is a necessity for cargo owners to protect themselves from financial losses associated with the transit of goods. In most cases an all-risk coverage policy is the best option to fully protect the cargo owner’s financial interests. Work with an experienced logistics service provider who has a strong relationship with knowledgeable logistics insurance specialists to get the right coverage for your cargo risks.

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