What is marine cargo insurance?
Marine cargo insurance is a policy that covers physical loss or damage to goods while they are in transit, by sea, air, road, or rail. It protects the owner of the goods (or whoever bears the risk under the Incoterm agreed) against financial loss if a shipment is lost, damaged, or destroyed. It is not compulsory under UK law, but without it, you absorb the full cost of any loss yourself.
If your goods are on a ship somewhere between China and Felixstowe and you are not sure whether you are covered, this article is for you.
Marine cargo insurance is one of those topics that many new shipping coordinators leave until something goes wrong. That is a costly mistake. Containers fall overboard. Goods get soaked in a hold. Consignments disappear in transit. When that happens, the question is not whether you have a problem, it is whether someone else pays for it.
This article explains how marine cargo insurance works, what the different levels of cover mean in practice, how it connects to your Incoterms, and what it actually costs for a typical UK import or export shipment.
Marine cargo insurance is a type of transport insurance that pays out if the goods you are shipping are lost, stolen, or damaged while in transit. Despite the name, it covers more than sea freight. A marine cargo policy can cover goods moving by:
The policy indemnifies the policyholder, usually the importer, exporter, or whoever holds the insurable interest in the goods, for the financial value of the loss.
Marine cargo insurance is not the same as freight liability insurance. Freight liability insurance covers what a carrier (a shipping line, airline, or haulier) is legally liable to pay you if they lose or damage your goods. That liability is capped, often very low, by international conventions such as the Hague-Visby Rules or the Montreal Convention. Marine cargo insurance is your own first-party cover on the goods themselves, regardless of the carrier’s liability.
What is covered depends entirely on which policy terms you buy. The standard used in most UK and international cargo insurance policies is the Institute Cargo Clauses (ICC), published by the International Underwriting Association of London.
There are three main levels: Clauses A, Clauses B, and Clauses C.
At the broadest level, marine cargo insurance can cover:
The extent of your cover depends on which ICC Clause you choose. The next section explains each one.
The Institute Cargo Clauses set out exactly what risks are covered. They do not change the definition of marine cargo insurance, they define the scope of your protection.
| Risk | ICC C (Minimum) | ICC B (Intermediate) | ICC A (Widest) |
|---|---|---|---|
| Fire or explosion | Yes | Yes | Yes |
| Vessel stranding, grounding, or sinking | Yes | Yes | Yes |
| Collision or overturning of land conveyance | Yes | Yes | Yes |
| Jettison (goods thrown overboard) | Yes | Yes | Yes |
| Discharge of cargo at port of distress | Yes | Yes | Yes |
| Earthquake, volcanic eruption, lightning | No | Yes | Yes |
| Washing overboard | No | Yes | Yes |
| Entry of seawater, lake water, or river water into vessel, hold, or container | No | Yes | Yes |
| Total loss of package during loading or unloading | No | Yes | Yes |
| Theft and pilferage | No | No | Yes |
| Breakage and leakage | No | No | Yes |
| Deliberate damage or malicious acts | No | No | Yes |
| All other accidental physical loss or damage | No | No | Yes |
ICC C: Named Perils (Minimum Cover)
ICC C is the minimum level of cover. It only pays out for the specific events listed in the clause. If your goods are stolen, soaked by rainwater, or broken during rough handling and the cause is not one of the named perils, you have no claim. ICC C is the standard that CIF Incoterm requires sellers to provide under Incoterms 2020. For many modern shipments, ICC C is not adequate.
ICC B: Intermediate Cover
ICC B adds a range of additional named perils to those in ICC C. It covers washing overboard, water ingress into the vessel or container, and losses during loading and unloading. It still does not cover theft or deliberate damage. ICC B suits certain commodities where the additional named perils are the main concerns.
ICC A: All Risks (Widest Cover)
ICC A covers all risks of physical loss or damage from any external cause, unless a specific exclusion applies. It is the broadest standard form of marine cargo cover and is strongly recommended for most commercial shipments. Under Incoterms 2020, CIP Incoterm (Carriage and Insurance Paid To) requires the seller to provide ICC A cover as a minimum, a deliberate upgrade from the old Incoterms 2010 standard.
If you are in any doubt, buy ICC A.
Even the widest ICC A policy has exclusions. These are standard across most policies:
Inherent vice. If the goods deteriorate because of their own nature, fruit rotting, rubber perishing, metal corroding, the insurer will not pay. The goods must have been in good condition when they were shipped.
Inadequate packing. If goods arrive damaged because they were not properly packed for the voyage, the claim will likely be rejected. Marine cargo demands export-standard packing, especially for long sea voyages.
War and strikes. War risks and strikes are excluded from the standard ICC clauses. They can usually be added as separate extensions. War Clauses and Strikes Clauses, for an additional premium.
Delay. Marine cargo insurance covers physical loss or damage, not financial loss caused by delay. If your goods arrive two weeks late and you lose a contract, that is not a cargo insurance claim.
Wilful misconduct of the insured. If the policyholder deliberately damages or abandons the goods, there is no cover.
Insolvency of the carrier. If a shipping line goes bankrupt and your container is stranded, marine cargo insurance does not cover that financial loss.
Your Incoterm determines who holds the risk in transit, and so who should be holding the insurance policy. This is one of the most important connections in international trade.
Under most Incoterms, the risk of loss or damage passes from the seller to the buyer at a defined point in the journey. From that point on, the buyer needs to have insurance in place if they want protection.
Only two Incoterms require the seller to arrange cargo insurance:
CIF (Cost, Insurance and Freight): The seller must arrange and pay for marine cargo insurance on behalf of the buyer. However, CIF only requires the seller to buy minimum cover. ICC C. That minimum may not protect the buyer’s goods adequately. If you are buying on CIF terms, check what policy the seller has arranged and consider whether you need to top it up.
CIP (Carriage and Insurance Paid To): The seller must arrange insurance, and since Incoterms 2020, the minimum required is ICC A (all risks). CIP is available for all modes of transport including multimodal. It provides the buyer with better protection than CIF.
Under all other Incoterms. EXW, FCA, FAS, FOB, CFR, DAP, DPU, DDP, the seller has no obligation to arrange insurance. Whoever holds the risk at any given point must arrange their own cover. For buyers on FOB or FCA terms, risk passes early (at the origin port or named place), so they need their own policy in place from that point.
A common mistake is to assume that because the seller has arranged freight, they have also arranged insurance. Those are two different things. Check your Incoterm and check your cover.
Marine cargo insurance is typically priced as a percentage of the insured value of the goods. In the UK market, rates generally fall between 0.1% and 0.5% of cargo value for standard commercial goods on established trade routes.
The exact rate depends on several factors:
Indicative UK premium examples (2025/2026 market):
| Cargo value | Cover level | Indicative rate | Approximate premium |
|---|---|---|---|
| £10,000 | ICC C | 0.15% | £15 |
| £10,000 | ICC A | 0.30% | £30 |
| £50,000 | ICC C | 0.15% | £75 |
| £50,000 | ICC A | 0.25%–0.35% | £125–£175 |
| £100,000 | ICC A | 0.20%–0.30% | £200–£300 |
For a typical UK importer shipping a £50,000 consignment under ICC A (all risks), you would expect to pay roughly £100–£250 in premium. That is a small cost relative to the value at risk.
Minimum premiums also apply, many insurers charge a minimum of £25–£50 per declaration even for low-value shipments.
The sum insured is the maximum amount your insurer will pay out in the event of a total loss. Getting this right is important, under-insuring leaves you exposed; over-insuring means paying premium on value you cannot recover.
The standard method is CIF value plus 10%.
CIF value = Cost of goods + Insurance + Freight
The 10% uplift covers your anticipated profit on the goods, the value you would have made if the shipment had arrived safely. This is an internationally accepted convention under most marine cargo policies and is referenced in the Institute Cargo Clauses.
Example:
If you are buying on FOB terms and the freight is £2,500, add the freight cost and an estimate for the insurance premium before applying the 10% uplift. Do not insure only the invoice value of the goods, you will not recover your full loss.
There are two main ways to arrange marine cargo insurance in the UK: open cover (also called an annual or open policy) and single shipment cover.
Open Cover
An open cover is an annual policy that automatically covers all shipments you make during the policy year, up to declared limits of value per shipment, per mode, and per location. You declare each shipment to the insurer (often monthly) and pay premium based on actual shipments made.
Open cover is the right choice for businesses that ship regularly. It is administratively simpler (one policy, one renewal), generally cheaper per £ insured, and ensures you never forget to arrange cover for an individual shipment. It also means you are covered for shipments you forget to declare, provided you notify the insurer as soon as practicable.
Single Shipment Cover
Single shipment cover is taken out for one specific voyage. You define the cargo, the route, the value, and the cover level, and the policy attaches to that shipment only. It costs more per £ insured than open cover but is appropriate for:
If you are just starting out in your role as a shipping coordinator, check whether your company already has an open cover policy before arranging separate single shipment insurance.
You will sometimes see marine cargo insurance described as “all-risk” or “named perils” cover rather than being referred to by ICC Clause letters. These terms describe the same distinction.
Named perils insurance (ICC C and, to a degree, ICC B) covers only the specific risks listed in the policy. If the cause of loss is not named, you are not covered. The burden is on you to show that the loss falls within a named peril.
All-risk insurance (ICC A) covers any accidental physical loss or damage from an external cause unless it is specifically excluded. The burden shifts to the insurer to prove an exclusion applies. This is a major legal and practical advantage in a claim.
In the UK, “all-risk” does not mean every risk, it still excludes war, strikes, inherent vice, and inadequate packing. But it is substantially broader than named perils cover, and the shift in burden of proof makes claims easier to progress.
For most commercial shipments, all-risk (ICC A) is the appropriate choice.
If something goes wrong with your shipment, the actions you take in the first 24 to 48 hours are critical. A poorly handled claim can be reduced or rejected even when the underlying loss is valid.
Step 1: Note the damage or loss immediately.
When goods arrive damaged or short-shipped, note the damage on the delivery receipt or the carrier’s delivery note before the driver leaves. Do not sign a clean receipt for damaged or incomplete goods. “Received in apparent good order and condition” is a clean receipt. If you sign one, you have made the claim majorly harder.
Step 2: Notify your insurer without delay.
Most policies contain a notification clause requiring you to advise the insurer of a claim as soon as practicable. Do not wait. Contact your insurance broker or insurer and advise them of the circumstances. They will issue a claim reference and guide you on the next steps.
Step 3: Preserve the goods and evidence.
Do not dispose of, repair, or process damaged goods without the insurer’s agreement. Photograph everything, the outer packaging, the inner packaging, and the damaged goods themselves. Keep all original packaging until the claim is settled.
Step 4: get a survey if required.
For major losses, the insurer may appoint an independent marine surveyor to inspect the goods and report on the cause and extent of damage. Cooperate with the surveyor and provide all relevant documentation.
Step 5: Gather your documentation.
A typical marine cargo claim requires:
Step 6: Preserve your rights against the carrier.
Marine cargo insurance is indemnity insurance. If the carrier caused the loss, the insurer who pays your claim has the right to pursue the carrier on your behalf (subrogation). To protect this right, you or your insurer must issue a formal claim against the carrier within the relevant time limit. For sea freight under the Hague-Visby Rules, that is one year from delivery. For air freight under the Montreal Convention, it is two years.
Technically, no. Marine cargo insurance is not compulsory in the UK (unless your Incoterm requires you to arrange it for the other party). You can choose to self-insure, to absorb any losses from your own funds.
The question is whether self-insuring is a rational decision.
Consider the exposure. A £50,000 container shipment lost at sea is a £50,000 loss that comes directly out of your business. At ICC A rates, insuring that shipment costs around £125–£175. The premium is 0.25%–0.35% of the cargo value. The maths strongly favours buying insurance.
Consider the frequency. Even if you ship regularly and most consignments arrive intact, the one loss event that is not covered can exceed years of premium savings. A total loss, a theft, or a general average call (where you may be asked to contribute to another party’s loss) can be financially devastating without a policy in place.
Consider the general average risk. General average is a maritime legal principle where all cargo owners on a vessel share the cost of a sacrifice made to save the voyage: for example, if cargo is jettisoned in an emergency or the vessel is salvaged. Even if your own goods are undamaged, you may be required to contribute to a general average fund. Without marine cargo insurance, you pay that contribution yourself and your goods may be held at the port until you do.
The risk of self-insuring is not just losing a single consignment. It is the unpredictability, you do not know when the loss will come, how large it will be, or whether it will coincide with a period when the business can least afford it.
In the UK, marine cargo insurance can be arranged through three main routes:
1. A specialist marine insurance broker. This is the most common route for businesses with regular shipments. A specialist broker, such as Howden, Gallagher, or a Lloyd’s broker, will assess your needs, access the London market and beyond, and negotiate competitive rates. They will also help you manage claims.
2. A freight forwarder or customs broker. Many freight forwarders offer cargo insurance as an add-on service. This is convenient but can be more expensive than going direct to a specialist broker. Check the policy terms carefully, some forwarder-arranged policies have restrictive terms or low claim limits.
3. Direct with an insurer. Some insurers (including Allianz and specialist underwriters) offer direct marine cargo products, particularly for SMEs. This works well for straightforward cover requirements.
When evaluating providers, look at:
Always read the policy wording before binding cover. The summary document tells you what is covered. The full policy wording tells you what is excluded.
Scenario: A UK importer orders electronic components from a supplier in Taiwan. The agreed Incoterm is FOB Kaohsiung. The invoice value is £50,000. Ocean freight is £1,800. The importer is responsible for arranging cargo insurance from the moment goods are on board the vessel at Kaohsiung.
Option 1: ICC C (Named Perils. Minimum Cover)
The importer arranges ICC C cover. The sum insured is calculated as:
At an indicative rate of 0.15%, the premium is around £86.
During the voyage, the container suffers a partial ingress of seawater. The goods are damaged. The importer makes a claim. Under ICC C, seawater ingress is not a named peril. The claim is rejected. The importer absorbs the £32,000 loss from stock that was written off.
Option 2: ICC A (All Risks. Widest Cover)
The importer arranges ICC A cover on the same sum insured of £57,079.
At an indicative rate of 0.30%, the premium is around £171.
The same seawater ingress occurs. The importer makes a claim. Under ICC A, accidental damage from water ingress is covered. The surveyor confirms the cause. The claim is paid. The importer recovers £32,000.
The difference in premium between Option 1 and Option 2 was £85. The difference in outcome was £32,000.
This is not a hypothetical risk. Seawater ingress into containers is a common, documented cause of cargo loss, particularly on long ocean voyages in adverse weather conditions.
Is marine cargo insurance compulsory in the UK?
No. UK law does not require you to hold marine cargo insurance. However, if you are trading on CIF or CIP Incoterms, you are contractually required to arrange insurance for the buyer. And if you do not have cover, any loss falls entirely on you.
Does marine cargo insurance cover all modes of transport?
Yes. Despite the name, a standard marine cargo policy covers goods in transit by sea, air, road, and rail. It also covers goods while in storage at intermediate points during the journey (subject to transit clause time limits, typically 60 days after arrival at the final warehouse).
What is the difference between marine cargo insurance and freight liability insurance?
Freight liability insurance covers what a carrier owes you if they are responsible for your loss. That liability is heavily capped by international conventions. Marine cargo insurance is your own first-party cover on the goods themselves, regardless of the carrier’s liability. The two types of insurance can co-exist, and you may recover from the carrier and your own insurer in parallel (with subrogation applying to prevent double recovery).
What does general average mean, and does marine cargo insurance cover it?
General average is a maritime law principle where all parties with cargo on a vessel share in the costs of a deliberate sacrifice made to save the ship and cargo. If cargo is jettisoned or the ship is salvaged, all cargo owners contribute proportionally, even if their own goods are undamaged. A standard marine cargo policy (ICC A, B, or C) covers your general average contribution. Without insurance, you pay it yourself and your goods may be held until you do.
Can I insure goods I do not own?
You can only insure goods in which you have an insurable interest, a legal or financial stake in the safe arrival of the goods. As an importer who has paid for goods on FOB terms, you have an insurable interest from the point risk passes to you. As an exporter who has not yet been paid, you may also have an insurable interest depending on the payment terms. If you are unsure, seek advice from your broker.
What happens if I under-insure my cargo?
If the sum insured is less than the actual value of the goods, most marine cargo policies apply the principle of average (also called pro-rata). This means the insurer pays only the proportion of the loss that corresponds to the proportion of the value insured. For example, if your goods are worth £100,000 but you insured them for £50,000, a £20,000 loss may be settled at £10,000. Always insure for the full CIF value plus 10%.
How long does it take to settle a marine cargo claim?
Simple claims with clear documentation can settle within a few weeks. Complex claims involving large losses, disputed liability, or multi-party disputes can take months. The quality of your documentation, particularly the delivery note notation and photographs, majorly affects how quickly a claim is resolved.
Does marine cargo insurance cover delays?
No. Marine cargo insurance covers physical loss or damage to goods. Financial losses caused by delay, missed production deadlines, lost contracts, storage costs: are not covered by a standard marine cargo policy. Delay in start-up insurance is a separate product that covers consequential losses from delayed project cargo, but it is not a standard feature of a cargo policy.
Marine cargo insurance covers physical loss or damage to goods in transit by sea, air, road, or rail. It is not compulsory but is strongly advisable.
The three standard cover levels are ICC C (named perils only, minimum), ICC B (intermediate), and ICC A (all risks, widest). ICC A is recommended for most commercial shipments.
ICC C only covers fire, explosion, collision, grounding, jettison, and a handful of other named events. It does not cover theft, breakage, or water damage from ingress.
Only CIF and CIP Incoterms require the seller to arrange insurance. Under CIF, the minimum is ICC C. Under CIP (since Incoterms 2020), the minimum is ICC A.
The standard sum insured is CIF value plus 10% to cover anticipated profit on the goods.
UK marine cargo insurance rates typically range from 0.1% to 0.5% of cargo value. For a £50,000 shipment under ICC A, expect to pay around £100–£250.
Open cover (annual policy) is more cost-effective and administratively simpler for businesses with regular shipments. Single shipment cover suits occasional or one-off consignments.
Always note damage on delivery receipts before signing. Notify your insurer immediately. Preserve goods and evidence until the surveyor has inspected.
General average is a real risk even if your goods arrive undamaged. Marine cargo insurance covers your general average contribution.
The cost of marine cargo insurance is a very small fraction of the value at risk. The cost of not having it, when a loss occurs, is not.
This article is part of a learning path — return to explore more topics.
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