What are the main levels of cargo insurance cover?

Cargo insurance coverages include shipment transportation via water, air, road, and rail. But to what extent you’re covered will depend on the type of policy you choose.

Pay close attention to the details of your policy and clarify any doubts you may have with your insurance provider before signing the document.

All risk

The all risk coverage offers one of the broadest types of coverage with a wide range of protection against external factors. In general, it covers most types of physical losses and damages as a result of the external causes a merchandise may encounter. This is usually for what’s deemed as “approved” or “general” goods, which are goods that are new and not easily susceptible to losses and damages.

Named perils policy

The named perils policy is also formerly known as the “Free of Particular Average”. Unlike the all risk, it covers only the losses caused by the perils specifically named in the policy. So it’s generally more limited. This policy can include:

• Vessel collision
• Vessel sinking
• Derailment
• Bad weather
• Non-delivery
• Fire
• Earthquake
• Theft, etc.

General average

General average is a maritime concept that, depending on the outcome of the condition of your cargo following a peril at sea, could anger or relief some.

Cargo insurance plays a crucial role in global trade by offering financial protection against the risk of loss or damage to goods during transportation.

The three main levels of cargo insurance cover

1. Institute Cargo Clauses (C) – Basic Cover
   Institute Cargo Clauses (C) provide the most basic level of protection. This cover is generally used for cargo that is less susceptible to damage or is being transported in controlled conditions. It only insures against specific named perils, which means the policy only responds if the loss or damage is caused by events explicitly listed. The main risks covered under Clauses (C) include:
   • Fire or explosion
   • Vessel sinking, capsizing, or overturning
   • Derailment or overturning of land transport
   • Collision or contact of the vessel or conveyance with an external object
   • Discharge of cargo at a port of distress
   • General average sacrifice (a loss that arises when cargo is intentionally destroyed to save the vessel and other cargo)
   • Jettison (throwing cargo overboard to lighten the vessel)
   Clauses (C) do not cover losses from theft, pilferage, or natural disasters, making it a limited option. The basic nature of this coverage is suitable for cargo with low risk or shipments where the risk of damage is minimal.
2. Institute Cargo Clauses (B) – Intermediate Cover
   Institute Cargo Clauses (B) provide a higher level of protection compared to Clauses (C), but it still does not offer comprehensive coverage. Clauses (B) cover all risks listed in Clauses (C) and extend to additional perils. The broader scope of protection includes:
   • Earthquake, volcanic eruption, or lightning
   • Washing overboard (cargo swept off a ship by waves)
   • Entry of sea, lake, or river water into the vessel or conveyance
   • Total loss of any package during loading or unloading
   Despite the expanded coverage, Clauses (B) still have limitations and do not cover losses due to war, strikes, or damage caused by inherent defects in the goods. Additionally, it excludes damage from ordinary leakage, loss of market, or delays. This level of coverage is often selected for shipments with moderate risk exposure, where specific risks must be insured, but comprehensive protection is not necessary.
3. Institute Cargo Clauses (A) – Comprehensive Cover
   Institute Cargo Clauses (A) provide the most extensive and comprehensive level of cargo insurance cover. Known as “all risks” coverage, it insures against all types of physical loss or damage, except for the exclusions specifically mentioned in the policy. Common exclusions include:
   • Loss or damage due to the inherent vice of the goods (natural deterioration or a condition that causes goods to self-destroy)
   • Deliberate damage by the insured party
   • Loss or damage from war, strikes, riots, or civil commotion unless covered by a separate endorsement
   • Delay or loss of market
   This coverage is typically recommended for high-value or fragile cargo, where even minor damage could result in significant financial loss. Clauses (A) are suitable for a wide range of transportation modes, including sea, air, and road, and ensure comprehensive protection for international and domestic shipments.

Choosing the Right Level of Cover

Selecting the appropriate level of cargo insurance depends on factors such as the value of the goods, the nature of the cargo, the route and method of transport, and the level of risk involved. High-value or fragile items are better protected under Clauses (A), while bulk goods with lower damage risk may be sufficiently insured under Clauses (B) or (C).