FAQ and Pitfall Avoidance Guide for Cargo Insurance

Cargo insurance seems simple, but there are many "pitfalls" in practice—you might think it's unnecessary when buying it, only to find the coverage is insufficient when filing a claim. Here are the 10 most common questions about cargo insurance, hoping to help you avoid unnecessary trouble.

Q1: Does buying insurance cover all losses?

Not necessarily. Different types of coverage have different scopes, and all insurance policies have exclusions (situations not covered).

Common exclusions include:

All risks coverage is not truly "all-encompassing"; not all losses are covered. Be sure to read the exclusion clauses in the policy before purchasing.

Q2: What happens if the insured amount is too low?

If the insured amount is lower than the actual value of the goods (i.e., underinsurance), the insurance company will pay claims proportionally.

For example:

Actual value of goods: $100,000
Insured amount: $50,000 (underinsured, only 50% insured)
Loss amount: $20,000
Claim payout: $20,000 x ($50,000 / $100,000) = $10,000

This is why industry practice recommends insuring at 110% of the CIF value — if insured at 100%, after deductibles, the actual payout will be lower than the loss.

Q3: What does a deductible mean?

A deductible (Deductible/Franchise) is the portion of a loss that the insurance company does not pay, which is borne by the cargo owner.

Domestic cargo insurance commonly uses the "absolute deductible" model, typically 5% or 10% of the loss amount.

Q4: What is the first thing to do when damage is discovered?

Take photos! Take photos! Take photos! This is the most important and often overlooked step.

From a claims perspective, the completeness of the evidence chain directly determines the smoothness of the claim payout. After discovering damage:

1. First take photos/videos (do not move the goods)
2. Notify relevant parties (freight forwarder, insurance company, carrier)
3. Apply for a survey (third-party agency issues a report)
4. Keep packaging and documents (do not discard any packaging materials)

Q5: How soon must damage be reported to the insurance company?

It is highly recommended to notify within 3 days.

Policies usually stipulate that the insurance company must be notified within a certain number of days after the goods arrive at the port/pick-up. In practice, the suggestion is to:

• Immediately take photos to preserve evidence
• Within 3 days notify the insurance company by phone or email
• Within 7-14 days complete the survey

If the notification period is exceeded, the insurance company has the right to deny the claim.

Q6: Does "insurance included" as stated by a freight forwarder really cover everything?

Not necessarily. When a freight forwarder says "insurance included," you need to clarify three questions:

1. What type of coverage was purchased? — Free of Particular Average (FPA), With Average (WA), or All Risks? (Differences are significant)
2. What is the insured amount? — Is it fully insured at 110% of the cargo value?
3. What is the policy number? — Is there an official insurance policy?

It is advisable to request and review the official insurance policy rather than rely on the freight forwarder's promise.

Q7: Will insurance cover damage caused by inadequate packaging?

No, it won't. Damage caused by improper packaging is an exclusion under the insurance policy.

Packaging must:

• Meet the shipping/air freight standards for that type of cargo
• Be able to withstand normal loading, unloading, and transit vibrations
• Use appropriate packaging materials according to the nature of the goods

In other words, don't think buying insurance means you can "pack carelessly"—improper packaging is a common reason for insurance companies to deny claims.

Q8: What is General Average all about?

General Average is a special legal principle in maritime transport:

When a vessel faces a common danger, and the captain sacrifices something (e.g., jettisoning part of the cargo, requesting a tow) for the safety of the whole vessel, all cargo owners share the loss in proportion to the value of their cargo.

If insurance is purchased: The insurance company pays the General Average contribution. If there is no insurance: The contribution must be paid first to release the cargo—even if your goods themselves were not damaged.

Q9: Who buys insurance under FOB and CIF terms?

A common misunderstanding: Under FOB terms, although risk transfers to the buyer after the goods pass the ship's rail, the risk during the period before loading (from factory to port) is actually borne by the seller. It is recommended for the seller to also purchase inland transit insurance.

Q10: How much does the premium generally cost?

There is no standard rate for cargo insurance; it is influenced by cargo type, route, packaging, historical loss ratio, and other factors:

💡 Have more questions about cargo insurance? Contact Bofeng Logistics; we have channels with cooperating insurance companies for quick policy issuance.

📞 Insurance Consultation: 13075678958 | info@zhbfwl.com