You’ve successfully managed production, documentation, and customs. Your cargo is loaded and on its way. But what happens if the worst occurs—a container is lost overboard, the vessel runs aground, or goods are damaged during unloading?
The answer is often shocking to shippers: You are not covered for the full value of your goods.
At Clift Express, we believe in transparent risk management. Here is a definitive guide to understanding why All-Risk Cargo Insurance is a non-negotiable tool for protecting your financial investment.
1. The Critical Distinction: Liability vs. Insurance
The biggest myth in shipping is that the carrier (ship line, airline, or trucking company) assumes full financial responsibility for the value of your goods. They do not.
A. Carrier Liability (The Legal Minimum)
Carrier liability is the legal minimum compensation a carrier is required to pay, and it is governed by international conventions (e.g., Hague-Visby Rules for ocean, Montreal Convention for air).
| Mode of Transport | Liability Basis | Typical Payout Limit |
| Ocean Freight | Weight or package unit | Extremely limited, often less than 5% of actual value. |
| Air Freight | Weight (SDR/kg) | Higher than ocean, but still often capped far below the commercial value. |
Why Carrier Liability Fails You:
- Limited Payout: Payouts are often capped based on weight (e.g., $20 per kilogram) or per package, not the commercial value on your invoice. A $50,000 container of electronics might only yield a few thousand dollars in compensation.
- Exclusions: Carrier liability does not cover major unforeseen events like Acts of God (severe weather, natural disasters), Acts of War, or, crucially, General Average (see Section 3).
- Burden of Proof: You, the shipper, must prove the carrier’s negligence caused the loss, which is often difficult to do during complex transit.
B. All-Risk Cargo Insurance (The Full Protection)
Cargo insurance is a policy you purchase that is based on the declared commercial value of your goods, including freight and estimated profit.
- Coverage: Provides compensation for the full value of your goods.
- Payout: Based on your Commercial Invoice value plus freight costs, often with an additional percentage (e.g., 10%) to cover unexpected expenses.
- Scope: Covers nearly every conceivable risk unless explicitly excluded.
- Burden of Proof: You only need to prove the damage or loss occurred while the goods were in transit.
2. Why “All-Risk” is Your Best Bet
The term “All-Risk” is slightly misleading, as policies do have specific exclusions, but it is the most comprehensive coverage available. Unlike “Named Peril” policies (which only cover risks specifically listed, like fire or collision), All-Risk assumes everything is covered unless stated otherwise.
What All-Risk Typically Covers:
- Physical damage (scratching, denting, wetting, contamination).
- Theft, pilferage, and non-delivery.
- Accidents during transit, loading, and unloading.
- Natural disasters (storms, floods, earthquakes).
- Container loss at sea.
Common Exclusions (What’s NOT Covered):
- Inherent Vice: Damage due to the natural characteristics of the goods (e.g., spoilage of fruit or natural deterioration).
- Inadequate Packaging: Damage resulting from the shipper’s failure to pack the goods securely for transit.
- Delay: Financial loss due to market price changes or missed deadlines (consequential loss).
- War and Strikes: These are generally excluded but can often be added back via a supplemental clause for an extra premium.
3. The Threat of General Average (Ocean Freight Only)
For shippers using ocean freight, General Average (GA) is the most catastrophic uninsured risk, and it is covered by All-Risk insurance.
What is General Average?
It is a principle of maritime law where, if a vessel is in peril, the captain may sacrifice part of the cargo or incur extraordinary expenses (like hiring a salvage team) to save the whole voyage.
The Financial Impact:
If GA is declared, all cargo owners—even those whose goods were undamaged—are required to contribute to the financial cost of the salvage effort, proportional to the value of their saved cargo. If you are uninsured, the ship owner can hold your cargo hostage at port until you pay your required share.
All-Risk Cargo Insurance covers your General Average contribution, releasing your cargo immediately and protecting your balance sheet.
4. Calculating the Cost and Value of Insurance
The premium for comprehensive All-Risk Cargo Insurance is surprisingly affordable when viewed against the potential financial risk.
Cost: Typically ranges from 0.2% to 0.5% of the total insured value (TIV).
Total Insured Value (TIV) Formula:
To ensure full coverage, your TIV should include:
$$TIV = (\text{Commercial Invoice Value}) + (\text{Freight Cost}) + (10\% \text{ buffer for unforeseen expenses})$$
Example:
- Commercial Invoice Value: $\$50,000$
- Freight Cost: $\$5,000$
- 10% Buffer: $\$5,500$
- Total Insured Value (TIV): $\$60,500$
- Estimated Insurance Premium (at 0.4%): $$242.00
Spending a few hundred dollars to protect a $\$60,500$ investment is sound business practice.
✅ Protect Your Investment with Clift Express
As your freight forwarder, Clift Express acts as your intermediary, arranging this crucial insurance through reputable underwriters. We ensure your policy is correctly valued and tailored to cover the specific risks of your chosen shipping route and cargo type.
Don’t gamble your inventory and your business continuity on the carrier’s limited liability. Invest in the peace of mind that comes with knowing your entire financial interest is protected.
Ready to get a secure quote that includes full All-Risk protection?
