Why Every Shipment Needs Cargo Insurance

Cargo insurance is the line item shippers most often try to cut. It's also the one we most often advise clients to keep.

Here's the honest case for why every shipment — yours, ours, anyone's — needs it.

What the carrier's liability actually covers

Most shippers assume the shipping line, airline, or trucker is liable for damage or loss. They are — but for far less than people think.

• Sea carriers limit liability to roughly $500 per package or 666.67 SDR per unit under the Hague-Visby Rules.
• Air carriers limit liability to about 22 SDR per kilogram under the Montreal Convention.
• Road carriers in most jurisdictions have similar per-kilogram caps.

For a container of electronics worth $80,000, the carrier might be liable for as little as $5,000-$10,000 if the whole thing is lost. The rest is your problem.

What cargo insurance actually covers

A standard "All Risks" cargo policy covers physical loss or damage from any external cause during transit, including:

• Theft and pilferage
• Damage from handling, stowing, lashing
• Damage from accidents (collision, derailment, sinking)
• Damage from weather events during transit
• General average — when a vessel intentionally sacrifices some cargo to save the rest, you can be liable for a share even if your cargo is fine

General average is the one that catches people off guard. After the Ever Given grounding and various recent vessel fires, shippers without insurance have been hit with bills running into hundreds of thousands of dollars.

What it costs

For most general cargo, cargo insurance runs about 0.1% to 0.3% of cargo value. On a $50,000 shipment, that's typically $50-$150.

For high-risk cargo or routes (war zones, certain corridors, fragile or high-value goods), rates go higher — but still rarely above 1%.

The math is overwhelming

Even if only 1 in 200 shipments suffers significant damage or loss, the expected cost of self-insuring is far higher than the premium. And the variance — the risk of a single catastrophic loss — is the real reason to insure. Insurance smooths out a risk that could otherwise sink a small business.

You don't buy insurance because the cargo will definitely be damaged. You buy it because if it is, the unprotected version is a business-ending event.

The things to check on a policy

• Coverage type: All Risks (broadest), Institute Cargo Clauses A (similar), B, or C (narrower). Most shippers want A.
• Sum insured: Should be CIF + 10% at minimum, ideally CIF + 15-20% to cover incidental costs.
• Deductible: Lower deductibles cost more in premium. For most cargo, a modest deductible is fine.
• Warranties and exclusions: War, strikes, and inherent vice exclusions are standard. War and strikes can usually be added back for an extra premium.
• Claims process: A policy is only as good as the insurer's claims handling. We work only with insurers who actually pay.

How we handle it

Royal Renacido offers cargo insurance as part of our freight forwarding service — quoted upfront, transparently, on every shipment. You can take it, decline it, or bring your own. We won't pressure you, but we will be honest about which cargoes shouldn't move without it.

For most clients, the answer is straightforward: insure it. The peace of mind costs less than one sleepless night.