No shipper wants to think about cargo insurance until something goes wrong. But when freight is lost or damaged, the value of coverage becomes clear fast.
Cargo insurance helps protect the financial value of goods in transit. It can also protect cash flow and customer commitments when an unexpected event turns a routine shipment into an expensive problem.
The allision of the MV Dali and Francis Scott Key Bridge in Baltimore showed how quickly a logistics disruption can escalate. In the aftermath, more than 4,500 containers on board the MV Dali were affected, and the vessel owner declared General Average. That meant cargo owners could be required to share in recovery costs tied to the incident.
General Average is a long-standing maritime law that allows a carrier to require cargo owners to contribute to the costs of the salvage operation, including the recovery of the vessel and cargo. The carrier can refuse to release cargo until financial arrangements are made for general average payments.
The average adjuster declared a 55% assessment based on the value of the cargo for the General Average fund. In the case of the Baltimore incident, the General Average assessments did not include any costs for rebuilding the bridge.
Shippers with all-risk marine cargo insurance were able to provide a General Average guarantee or bond needed to release their goods. Those without insurance were required to make cash deposits or provide bank guarantees for their assessment.
| MV Dali General Average | Low value cargo | High value cargo |
|---|---|---|
| Container Value | $20,000 | $200,000 |
| GA Assessment (55%) | $11,000 | $110,000 |
| Cost to cargo owner, no Insurance | $11,000 | $110,000 |
| Cost to cargo owner with insurance | $0 | $0 |
That is why cargo insurance matters. Not because losses happen every day, but because when they do happen, the costs can be far greater than the premium.
International Shipping Insurance Myths
We will look at three common myths about cargo insurance and explain what can happen when freight is not properly protected.
Myth 1: Carrier liability is enough
Carriers may be liable for lost or damaged freight, but that liability is limited and depends on the mode of transport, the contract, and the applicable law. In many cases, carrier liability does not come close to covering the full commercial value of the shipment.
For example, truck shipments in the United States are governed by the Carmack Amendment, which limits carrier liability under specific conditions. A shipment with a commercial value of $25,000 may recover only a fraction of that amount under default liability rules.
Air freight is also limited. International air shipments are generally subject to compensation caps based on Special Drawing Rights rather than the full value of the goods. Ocean freight adds another layer of risk through General Average, in which cargo owners may be required to contribute to the vessel’s recovery costs after a major casualty.
Fact 1: All-risk cargo insurance pays no matter who is responsible
Dimerco’s all-risk cargo insurance helps protect the insured value of the shipment, subject to policy terms and exclusions. Coverage can extend up to 110% to help cover incidental expenses, and door-to-door protection can help reduce gaps in coverage along the entire shipment route.
That matters because carrier liability is not the same as reimbursement for the full replacement cost of lost or damaged goods. If your cargo is damaged in transit, you may receive only a small portion of its value from the carrier.
Cargo insurance can also work alongside damage prevention measures. Better packaging, handling protocols, and shipment planning can reduce claims and improve recovery outcomes. Dimerco has supported shippers with customized damage-prevention programs that have helped reduce incidents and streamline claims handling.
| Carrier liability vs. all-risk cargo insurance | ||
|---|---|---|
| Mode | Carrier liability | All-risk coverage |
| Air | 26 SDRs/kg | Full cargo value |
| Ocean | US$500/package or CFU | Full cargo value |
| Inland | Limited by contract/law | Full cargo value |
Note: Carrier liability is limited and varies by mode, contract, and law. All-risk cargo insurance is designed to cover the shipment’s insured value, subject to policy terms and exclusions.
Myth 2: Sellers/shippers are responsible for insurance
Many buyers assume the party arranging transport is also responsible for insurance. In reality, that responsibility is often determined by the Incoterms used in the sales contract.
Incoterms, short for International Commercial Terms, are rules established by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in global trade, including which party is responsible for shipping, insurance, customs duties, and risk at each stage of the supply chain.
Incoterms define when risk transfers and which party is responsible for arranging shipping-related obligations. Some Incoterms, such as Cost, Insurance, and Freight (CIF), designate which party is responsible for covering risk during an ocean voyage. The risk may transfer from seller to buyer when the goods are loaded onto the vessel. Confirm that the insurance terms meet your expectations. Under the Carriage and Insurance Paid To (CIP) Incoterm, the seller arranges insurance for all modes of transport.
It is important to confirm that the insurance terms match the commercial arrangement, not just the shipping paperwork. If the goods may move through conflict areas, such as certain routes in the Red Sea, the Strait of Hormuz, or Eastern Europe, a war-risk endorsement may also be needed.
Fact 2: Incoterms help define who bears the risk
The standardized Incoterms allow for smoother transactions and minimize disputes. They do not eliminate risk; they clarify who carries it and when. That makes them an important starting point, but not a substitute for reviewing actual insurance coverage.
The right policy should reflect the shipment’s route, mode, commodity, and exposure level. For more detail, see Dimerco’s Incoterms guide.
Myth 3: Increasing declared value is just as good as insurance
Declared value is not the same as insurance. Shippers can declare a higher value and pay a higher freight rate. But it is still subject to the limitations of carrier liability, such as the requirement to prove the carrier was responsible for the loss, and carrier exceptions still apply, such as Acts of God or shipper’s fault.
Fact 3: Cargo insurance pays when the carrier is not responsible
International cargo insurance is designed to pay the shipper for covered loss or damage without requiring proof that the carrier caused the loss or damage. The insurer may later pursue recovery from the responsible party, but the shipper does not have to wait for that process to finish.
That speed matters. When cargo is needed to fill customer orders or support production schedules, delayed reimbursement can create operational and financial strain.
Protect Against the Unexpected
Cargo can be damaged or lost at any point in the supply chain, and not all losses happen in dramatic ways. A tarmac accident, a vessel incident, a theft, or a routing disruption can all create costly claims and delayed deliveries.
Dimerco’s all-risk cargo insurance offers door-to-door protection across transport modes and helps shippers manage exposure on high-value or time-sensitive cargo. It is especially useful for companies moving expensive equipment, industrial machinery, or goods that are difficult to replace quickly.
The cost of not having insurance can be much higher than the premium. Replacing inventory, absorbing the loss, and managing customer expectations can all hit the bottom line at once.
Rely on Dimerco for the tools, guidance, and partnership to help protect what matters in transit. When you are ready to strengthen your cargo risk strategy, contact Dimerco for a cargo insurance quote.
Dimerco’s insurance experts can advise on coverage for high-value shipments to manage risks during transit, such as moving industrial machinery to a new location.
Cost of Not Having Insurance
Companies with all-risk cargo insurance can claim reimbursement and replace goods faster without a hit to their bottom line. Otherwise, the cost of replacing damaged goods and maintaining good customer relations could impact profitability.
Celebrity chef Guy Fieri found out the risks of inadequate insurance when two truckloads of his new signature tequila were stolen through a double-brokering scheme. The shipment of 24,000 bottles disappeared due to a spoofed GPS tracker.
While law enforcement recovered about half the shipment, the impact on Fieri’s company was severe. The carrier’s liability was about $0.50 to $0.60 per pound, far below the market value of the premium tequila.
While the insurance coverage on the loads hasn’t been made public, Fieri told news outlets his company was forced to lay off employees. That’s a clue that his company did not receive an insurance payout sufficient to overcome the loss.
It’s only a matter of when some of your freight is damaged or lost during transit. The question is whether you are prepared to mitigate losses through cargo insurance.
Dimerco’s all-risk cargo insurance provides door-to-door coverage anywhere, on any mode. For companies shipping to and from Asia, cargo insurance takes the risk out of transit-damaged freight. Our experts can help you build a cargo insurance program that automatically covers every shipment or targets high-value cargo on a per-shipment basis.
The cost of not having insurance can be much higher than the premium. Replacing inventory, absorbing the loss, and managing customer expectations can all hit the bottom line at once.
Rely on Dimerco for the tools, guidance, and partnership to help protect what matters in transit. When you are ready to strengthen your cargo risk strategy, contact Dimerco for a cargo insurance quote.
