I have worked in fulfillment operations long enough to know where things go wrong. Damaged shipments. Missing pallets. Claims that get denied because someone signed the wrong line on a delivery receipt.
The numbers back this up. More than 5% of eCommerce shipments are damaged in transit, and roughly 1% are stolen. If you ship 1,000 units a month, that is 50 damaged shipments every 30 days.
Here is what I see brands get wrong most often. They assume the carrier covers them. They do not check what ‘minimum insurance’ actually means. And they find out the hard way that carrier liability and freight insurance are two completely different things.
This insurance guide covers what freight insurance actually is, how cost insurance and freight (CIF) works in international trade, what marine freight insurance includes, and how to file a claim that does not get rejected. Whether you are a small business shipping its first container or a brand managing daily international volume, this applies to you.
For a full breakdown of the freight forwarding process, documentation, and customs clearance, read our freight forwarding guide.
This blog focuses specifically on freight insurance protection. Let’s get started!
The Gap Between Carrier Liability and Freight Insurance
Carrier liability is not insurance. This is the most important thing in this entire blog.
When you ship goods, your shipper hands cargo to a carrier who takes on legal responsibility for it. But that responsibility has a cap. For most US domestic trucking, the cap is $0.50 to $1.00 per pound.
This is what trucking insurance and commercial auto policies cover on the carrier’s side. They address bodily injury or property damage to third parties. They do not fully cover the value of your cargo.
Here is what that looks like in practice.
You ship 200 lbs of electronics worth $50,000. The shipment is lost. The carrier’s liability payout under basic coverage is $100. You absorb the remaining $49,900.
That is not a hypothetical. That is a real scenario that plays out regularly for brands that skip freight insurance.
And the risk is growing fast. In 2024, cargo theft incidents across North America hit 3,625, a 27% year-over-year increase with total losses exceeding $455 million.
What makes this worse is what happens when you try to recover through carrier liability. Over 50% of carrier liability claims are rejected outright. Of those that do get paid, payouts take months leaving your cash flow and inventory position exposed in the meantime.
Freight insurance, also called cargo freight insurance or shipping insurance, is a separate type of policy. It covers the declared value of your goods, not their weight.
It kicks in when the carrier’s payout falls short of your actual loss. Insurance protects the full value of your shipment in a way carrier liability never will.
The insurance gap is the difference between what the carrier pays and what your goods are worth. For high-value shipments, that gap is often enormous.
Types of Freight Insurance Coverage
Not all policies are the same. Here is a breakdown of the main types.
| Coverage Type | What It Covers | Best For |
|---|---|---|
| All-Risk | Damage, theft, loss from any external cause | High-value or fragile goods |
| Named Perils | Only the specific risks listed in the policy | Commodities with predictable risk profiles |
| Total Loss Only | Pays out only if the entire shipment is destroyed or lost | Lower-value bulk cargo |
| Basic Coverage | Carrier default liability only | Not recommended for valuable goods |
| Contingent Cargo | Fills gaps when a carrier’s own policy fails or denies | Freight brokers and forwarders |
One more option matters for brands that ship regularly. An open or annual policy covers all shipments within a set period. You pay one premium, and every shipment is automatically covered.
For brands shipping more than two or three times per month, this is almost always cheaper than per-shipment coverage.
Institute Cargo Clauses: A, B, and C
If you ship internationally, you will see references to Institute Cargo Clauses. These are the global standard for marine cargo insurance.
| Clause | Coverage Level | Common Use |
|---|---|---|
| Clause A | Broadest – all risks unless specifically excluded | Recommended for most international shipments |
| Clause B | Named perils including earthquakes, washing overboard, water damage | Mid-tier risk cargo |
| Clause C | Minimal – covers fire, sinking, collision, stranding only | The minimum required under CIF |
Clause C is the minimum standard under the CIF incoterm. Most sellers assume CIF means they are well-covered. Clause C leaves a lot of risk with the buyer.
What Freight Insurance Covers and What It Does Not
Comprehensive freight insurance provides protection against:
- Physical damage from accidental events, rough handling, or weather
- Theft or piracy during transit
- Loss of the entire shipment
- General Average contributions (more on this below)
- Fire, collision, and sinking for ocean freight
What is the General Average?
This one catches people off guard. If a vessel encounters an emergency and cargo has to be jettisoned to save the ship, all cargo owners on that voyage share the financial loss. Proportionally.
Your goods could arrive safely and you could still owe money as part of the General Average claim. Freight insurance covers your share of that loss. Without it, you pay out of pocket.
Common Exclusions
Insurance may not pay out in the following situations. Always read the terms and conditions of any policy before you buy.
- Damage caused by improper or insufficient packaging
- Inherent vice (goods that spoil or deteriorate under normal conditions)
- Delays, even if caused by the carrier
- War and political risk, unless specifically added
- Customs seizure or government action
- Market value losses
Commodity-Specific Risks
Some cargo categories carry higher risk and require either specialist coverage or endorsements.
| Commodity | Risk Factor | What to Do |
|---|---|---|
| Electronics | High theft risk, up to 30% premium increase | All-risk coverage minimum |
| Pharmaceuticals and supplements | Temperature excursion, regulatory compliance | Verify temperature coverage is included |
| Perishables | Spoilage exclusions in most standard policies | Specialist cold chain coverage required |
| Hazardous materials | Restricted under most standard policies | Specialist insurer required |
For brands handling cold storage and temperature-controlled products, standard freight insurance often does not cover spoilage. Check the policy language before assuming you are covered.
What Is Cost Insurance and Freight (CIF)
The cost insurance and freight definition is this: CIF is a trade term under Incoterms 2020 where the seller pays for freight and arranges minimum insurance to the named destination port. It is one of 11 internationally recognized icoterm rules set by the International Chamber of Commerce.
Under a CIF agreement, the seller takes responsibility for three things. They arrange and pay for freight to the named destination port. They purchase insurance to protect the goods during transit. They handle export clearance at the origin.
Once the goods are loaded onto the vessel, risk transfers to the buyer. The seller still pays freight and insurance after that point. But the buyer carries the risk of anything that happens at sea.
Here is why that matters. The seller is only required to purchase minimum coverage under Clause C. The buyer holds the risk from the moment goods are loaded. If something goes wrong at sea, the buyer files the claim under the seller’s minimum policy.
There is another problem that almost no blog mentions. Under CIF, the seller purchases the insurance and is typically named as the policy beneficiary and not the buyer. If your goods are damaged at sea, you may have to file the claim through your overseas supplier.
That means dealing with agents in a different time zone, potentially in a different language, for whom your claim is not a priority. Buyers who understand this push to arrange their own all-risk coverage rather than relying on the seller’s minimum policy.
Seller responsibilities under CIF
- Book and pay for freight to the destination port
- Purchase minimum cargo insurance (Clause C)
- Handle export clearance and customs documentation
- Provide the bill of lading and insurance certificate
Buyer responsibilities under CIF
- Pay destination handling charges
- Handle import clearance and duties
- Arrange final delivery from the destination port
The Containerized Cargo Problem
CIF was designed for bulk cargo and breakbulk shipments. The seller loads directly onto the vessel and has clear control up to that point.
For containerized freight, the situation is different. A container is typically handed to the port terminal before it is loaded onto the vessel. Under CIF, the seller’s responsibility ends at loading. But if the container is damaged in the terminal before loading, there is no clean coverage.
The correct incoterm for containerized cargo is CIP, not CIF.
| Incoterm | Best For | Insurance Required | Risk Transfer Point |
|---|---|---|---|
| CIF | Bulk, breakbulk, non-containerized sea freight | Clause C minimum | At vessel loading |
| CIP | Containerized freight, all transport modes | Clause A (all-risk) default | At carrier handover |
| FOB | Experienced buyers who control their own freight | Buyer arranges own insurance | At vessel loading |
If your supplier quotes CIF and your goods are containerized, ask them to switch to CIP. CIP requires all-risk coverage by default. That is a much stronger position for the buyer.
For cross-border shipments from China to the US, this distinction is especially relevant. A large portion of those shipments move in containers and get quoted under CIF terms incorrectly.
How CIF Pricing Works and What It Actually Costs
The cost insurance and freight price includes the product cost, freight cost, and insurance cost rolled into one quoted number.
The insurance component is calculated using the 110% rule. The insured value is set at 110% of the combined product and freight cost. The extra 10% accounts for incidental losses.
Worked Example:
- Cost of goods: $10,000
- Freight cost: $2,000
- Insured value: ($10,000 + $2,000) x 1.10 = $13,200
- Insurance premium at 0.5%: $66
The $66 is what the seller pays for minimum Clause C coverage. As the buyer, you are exposed to everything above that if you have not arranged your own additional coverage.
One more thing on CIF pricing that brands miss. Many countries calculate import duties on the CIF value, not just the product price.
If freight and insurance are included in the declared CIF value, duties apply to that full number. This increases your landed cost in ways that are easy to overlook when budgeting. For a deeper look at hidden costs in cross-border shipping, see our guide on hidden customs charges.
Always request the insurance certificate. Do not accept the CIF line item as proof that your goods are adequately covered.
How Much Does Freight Insurance Cost
Cargo insurance cost varies based on commodity, route, coverage type, and shipment frequency. Most insurance providers price coverage as a percentage of the insured value.
Reach out to your insurance partner or logistics provider to get competitive rates specific to your trade lanes and cargo type.
| Mode and Coverage | Typical Rate Range |
|---|---|
| Ocean freight, named perils | 0.1% to 0.5% of insured value |
| Ocean freight, all-risk | 0.5% to 1.0% of insured value |
| Air freight | 0.2% to 0.7% of insured value |
| Land transport | 0.1% to 0.4% of insured value |
| High-risk cargo (electronics, pharma) | 1.0% to 3.0% of insured value |
Three Real-World Estimates
Low value: A $5,000 garment shipment by ocean under named perils coverage at 0.3% costs approximately $16.50.
Mid value: A $30,000 electronics shipment by ocean under all-risk coverage at 0.8% costs approximately $264.
High value: A $100,000 pharmaceutical shipment by air under all-risk coverage at 1.2% costs approximately $1,320.
Insurance cost scales quickly for high-value cargo. But compare that to absorbing the full loss without coverage. Even at 1.2%, $1,320 is a predictable business expense. A $100,000 uninsured loss is a cash crisis.
The factors that push your rate up: high-theft commodities, routes through politically unstable regions or piracy zones, a history of prior claims, poor packaging documentation, and single-shipment policies vs annual open policies.
If your business ships consistently, ask your provider about an open policy. Volume across a year typically brings the per-load cost down meaningfully.
Many logistics providers and insurance providers offer instant quotes online. You can get a quote in minutes and compare options before committing.
How to File a Freight Insurance Claim
The claims process is where brands lose money they should have recovered. Most claim denials are preventable.
At Delivery: What to Do Before Signing Anything
Never sign the delivery receipt as ‘clear’ or ‘good condition’ if there is any doubt. Write ‘subject to inspection’ on the bill of lading. Have the driver acknowledge it. Take photos of the outer packaging before moving anything.
If you accept damaged goods without noting the damage, you weaken your claim significantly.
Documentation Checklist
- Bill of lading with damage noted at delivery
- Photographs of outer packaging, inner contents, and damage from multiple angles
- Commercial invoice and packing list
- Signed delivery receipt with written notations
- Survey report if a loss adjuster is appointed
- Original insurance certificate
Filing Deadlines by Mode
| Situation | Deadline |
|---|---|
| Concealed damage (not visible at delivery) | Report to carrier within 5 days of delivery |
| Loss or damage claims | File within 9 months of delivery date |
| Ocean freight under COGSA | Check bill of lading terms, varies by carrier |
Missing a deadline is one of the most common reasons claims are denied. Set a calendar reminder the day you receive any damaged shipment.
Why Claims Get Denied
| Denial Reason | How to Prevent It |
|---|---|
| BOL signed as clear at delivery | Always note damage before signing |
| Damaged goods disposed of | Never discard anything until the claim is resolved |
| Filed after the deadline | File immediately, even if the full amount is unknown |
| Insufficient packaging documentation | Keep packing specs and photos on file |
| Coverage gap between carrier and insurer | Verify policy terms before shipping, not after |
What Happens After You File
The insurer may appoint a loss adjuster. A loss adjuster is independent. They assess the damage, report to the insurer, and document the loss. They do not settle the claim. That is between you and your insurer.
Once your insurer pays out, they may pursue the carrier to recover what they paid. This is called subrogation. It happens after your claim is settled. You do not need to wait for it.
Typical claim resolution takes 30 to 120 days depending on documentation completeness and claim complexity.
Conclusion
From my time running fulfillment operations across FBA, DTC, B2B, and SFP programs, the brands that handle freight claims well are the ones who treat insurance as part of the shipping process, not an afterthought. They have documentation habits. They know their policy terms. And they do not rely on carrier liability to protect shipments worth far more than the carrier will ever pay.
If you are building out your international shipping setup and want to understand how freight forwarding fits into your overall operation, that is a separate piece of the puzzle worth understanding alongside this one.
Frequently Asked Questions
What is freight insurance?
Freight insurance is a policy that covers the declared value of your goods if they are lost, damaged, or stolen during transit. It is separate from carrier liability, which is limited by weight and often far below the actual value of goods.
What is cost insurance and freight (CIF)?
CIF is a trade term under Incoterms 2020. The seller pays for freight and arranges minimum insurance to the destination port. Risk transfers to the buyer when goods are loaded onto the vessel.
What does CIF include in the price?
A CIF price includes the product cost, freight charges, and minimum insurance (Institute Cargo Clauses C). It does not include destination handling, import duties, or coverage above the Clause C minimum.
Why should containerized cargo not use CIF?
CIF is designed for bulk and breakbulk cargo. For containerized goods, CIP is the correct incoterm. CIP requires all-risk (Clause A) coverage by default and has a cleaner risk transfer point for containerized shipments.
What is the General Average?
If a vessel jettisons cargo to save the ship, all cargo owners on that voyage share the financial loss proportionally. Freight insurance covers your share of a General Average claim.
What are Institute Cargo Clauses A, B, and C?
These are the global standards for marine cargo coverage. Clause A is all-risk and the broadest. Clause B covers named perils including water damage and earthquakes. Clause C is the minimum, covering only fire, sinking, collision, and stranding.
How long do I have to file a freight insurance claim?
For most damage claims, nine months from the delivery date. For concealed damage, you must report it to the carrier within five days of delivery. Check your specific policy for ocean freight terms under COGSA.
Joel den Boer serves as Head of Partnerships at AMZ Prep, leading strategic collaborations and growth initiatives while supporting FBA prep and fulfillment services for both emerging and established Amazon sellers. His experience as Ex-Embedded Operations Manager at GardaWorld encompasses complex preparation workflows, regulatory compliance management, and technology integration projects. He builds strong operational systems and partnership frameworks that maintain quality standards while adapting to Amazon’s evolving marketplace requirements
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