In the dynamic world of international trade, the journey of goods from the manufacturing factory to the final buyer often spans thousands of miles, crossing multiple countries, oceans, and modes of transport. No matter how well-prepared you are, unexpected risks such as natural disasters, maritime accidents, fires, or theft are always present.
That is why cargo insurance is not just a formality—it is a financial shield that protects the survival of your business.
1. What is Cargo Insurance in International Trade?
Cargo Insurance is a legal agreement between the cargo owner (insured party) and an insurance company. Under this agreement:
- The insured pays a premium
- In return, the insurer compensates for loss or damage to goods during transportation (by sea, air, land, or multimodal transport)
- Compensation applies to risks specified in the insurance contract
2. Why Must Businesses Pay Attention to Cargo Insurance?
Many new import-export businesses try to cut costs by skipping insurance. However, this is a risky decision for the following reasons:
- Minimize financial risks:
The total loss of a shipment can wipe out annual profits or even push a company toward bankruptcy. Insurance transfers this risk to a financially capable third party. - Compliance with Incoterms:
Under terms such as CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid to), the seller is legally required to purchase insurance for the buyer’s benefit.
👉 According to Incoterms 2020:- CIP requires Institute Cargo Clauses (A)
- CIF requires Institute Cargo Clauses (C)
- Meeting bank requirements:
When using Letters of Credit (L/C), banks often require valid insurance documents for payment release. - General Average principle:
If a ship is in danger and part of the cargo must be sacrificed to save the vessel, all cargo owners must share the loss—even if their goods are intact.
👉 With insurance, the insurer covers this contribution.
3. Common Insurance Coverage (ICC 1982 / 2009)
The Institute Cargo Clauses (ICC) issued by the London insurance market are the most widely used. There are three main levels:
🌟 Clause A (All Risks)
- The broadest coverage
- Covers all risks except general exclusions (e.g., poor packaging, inherent nature of goods, delay, war, strikes unless additionally covered)
🌟 Clause B
- More limited than Clause A
- Covers named risks such as:
- Fire, explosion
- Vessel grounding, sinking, capsizing
- Collision
- Earthquake, volcanic eruption
- Seawater entering cargo hold
🌟 Clause C
- Basic and lowest-cost coverage
- Covers only major events such as:
- Fire
- Ship sinking or capsizing
- Collision
- Emergency discharge
👉 Minor damages (e.g., moisture, weather-related issues) are not covered.
4. Types of Cargo Insurance Policies
Depending on shipment frequency, businesses can choose:
1. Voyage Policy
- Suitable for occasional shipments
- Each shipment is issued a separate Insurance Certificate
2. Open Cover / Open Policy
- Suitable for frequent traders
- A master contract covering all shipments within a period (usually 1 year)
- Businesses only need to declare shipment details → saves time & cost
5. Critical Notes When Purchasing Cargo Insurance
⚠️ Do not rely entirely on insurers or freight forwarders. Understand these key points:
- Insured Value:
Typically set at 110% of CIF/CIP value
→ The extra 10% covers expected profit and incidental costs - Read exclusions carefully:
Insurance does NOT cover:- Delay
- Natural loss
- Poor packaging by shipper
- Accurate declaration:
Incorrect cargo details, route, or vessel name may result in claim rejection - Act immediately in case of damage:
- Notify insurer
- Request surveyor inspection
- Obtain damage report from carrier
Conclusion
The cost of cargo insurance is relatively small (usually less than 1% of shipment value), but the protection it provides is invaluable.
In an increasingly unpredictable global supply chain, investing in cargo insurance is a smart and strategic decision for forward-thinking businesses.
Contact Us
If your business is looking for safe, cost-effective logistics solutions and expert advice on international cargo insurance, contact SONGWIN INTERNATIONAL LOGISTICS VIETNAM today. We are always ready to accompany you and protect every shipment.
📍 Address: 344 Nguyen Trong Tuyen Street, Tan Son Hoa Ward, Ho Chi Minh City
📞 Hotline (24/7): 083.681.3969 - 0373.262.105
📧 Email: Sales2@songwinlog.com
Songwin Logistics – Trust Builds Brand, Professionalism Creates Success.
CARGO INSURANCE IN INTERNATIONAL TRADE: A SOLID “SHIELD” FOR BUSINESSES
In the dynamic world of international trade, the journey of goods from the manufacturing factory to the final buyer often spans thousands of miles, crossing multiple countries, oceans, and modes of transport. No matter how well-prepared you are, unexpected risks such as natural disasters, maritime accidents, fires, or theft are always present.
That is why cargo insurance is not just a formality—it is a financial shield that protects the survival of your business.
1. What is Cargo Insurance in International Trade?
Cargo Insurance is a legal agreement between the cargo owner (insured party) and an insurance company. Under this agreement:
- The insured pays a premium
- In return, the insurer compensates for loss or damage to goods during transportation (by sea, air, land, or multimodal transport)
- Compensation applies to risks specified in the insurance contract
2. Why Must Businesses Pay Attention to Cargo Insurance?
Many new import-export businesses try to cut costs by skipping insurance. However, this is a risky decision for the following reasons:
- Minimize financial risks:
The total loss of a shipment can wipe out annual profits or even push a company toward bankruptcy. Insurance transfers this risk to a financially capable third party. - Compliance with Incoterms:
Under terms such as CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid to), the seller is legally required to purchase insurance for the buyer’s benefit.
👉 According to Incoterms 2020:- CIP requires Institute Cargo Clauses (A)
- CIF requires Institute Cargo Clauses (C)
- Meeting bank requirements:
When using Letters of Credit (L/C), banks often require valid insurance documents for payment release. - General Average principle:
If a ship is in danger and part of the cargo must be sacrificed to save the vessel, all cargo owners must share the loss—even if their goods are intact.
👉 With insurance, the insurer covers this contribution.
3. Common Insurance Coverage (ICC 1982 / 2009)
The Institute Cargo Clauses (ICC) issued by the London insurance market are the most widely used. There are three main levels:
🌟 Clause A (All Risks)
- The broadest coverage
- Covers all risks except general exclusions (e.g., poor packaging, inherent nature of goods, delay, war, strikes unless additionally covered)
🌟 Clause B
- More limited than Clause A
- Covers named risks such as:
- Fire, explosion
- Vessel grounding, sinking, capsizing
- Collision
- Earthquake, volcanic eruption
- Seawater entering cargo hold
🌟 Clause C
- Basic and lowest-cost coverage
- Covers only major events such as:
- Fire
- Ship sinking or capsizing
- Collision
- Emergency discharge
👉 Minor damages (e.g., moisture, weather-related issues) are not covered.
4. Types of Cargo Insurance Policies
Depending on shipment frequency, businesses can choose:
1. Voyage Policy
- Suitable for occasional shipments
- Each shipment is issued a separate Insurance Certificate
2. Open Cover / Open Policy
- Suitable for frequent traders
- A master contract covering all shipments within a period (usually 1 year)
- Businesses only need to declare shipment details → saves time & cost
5. Critical Notes When Purchasing Cargo Insurance
⚠️ Do not rely entirely on insurers or freight forwarders. Understand these key points:
- Insured Value:
Typically set at 110% of CIF/CIP value
→ The extra 10% covers expected profit and incidental costs - Read exclusions carefully:
Insurance does NOT cover:- Delay
- Natural loss
- Poor packaging by shipper
- Accurate declaration:
Incorrect cargo details, route, or vessel name may result in claim rejection - Act immediately in case of damage:
- Notify insurer
- Request surveyor inspection
- Obtain damage report from carrier
Conclusion
The cost of cargo insurance is relatively small (usually less than 1% of shipment value), but the protection it provides is invaluable.
In an increasingly unpredictable global supply chain, investing in cargo insurance is a smart and strategic decision for forward-thinking businesses.
Contact Us
If your business is looking for safe, cost-effective logistics solutions and expert advice on international cargo insurance, contact SONGWIN INTERNATIONAL LOGISTICS VIETNAM today. We are always ready to accompany you and protect every shipment.
📍 Address: 344 Nguyen Trong Tuyen Street, Tan Son Hoa Ward, Ho Chi Minh City
📞 Hotline (24/7): 083.681.3969 - 0373.262.105
📧 Email: Sales2@songwinlog.com
Songwin Logistics – Trust Builds Brand, Professionalism Creates Success.
