Every shipment that travels by sea is exposed to storms, water ingress, container loss, fire, collision and theft. The carrier's liability under the bill of lading is capped by international conventions and usually falls far short of the cargo's real value. Marine cargo insurance exists to close that gap. It covers physical loss of or damage to goods while in transit from origin to destination, within the terms of the policy. In this article, Özd Global explains the types of cover, the Institute Cargo Clauses, what to look for when choosing a policy, the concept of general average and the steps to take when a claim arises.
Why Marine Cargo Insurance Is Necessary
Under regimes such as the Hague-Visby Rules, a carrier's liability is generally limited to a fixed amount per package or per kilogram. The carrier can also escape liability altogether in many situations, including natural disasters, errors in navigation and fire. Without insurance, most of the loss therefore stays with the cargo owner. Under letters of credit and CIF/CIP terms, an insurance policy is already a mandatory document; under other delivery terms, the buyer or seller should arrange cover to protect their own risk.
Types of Cover: The Institute Cargo Clauses
In international practice, marine cargo insurance is written under three main sets of clauses:
| Clause | Scope of cover | Suitable cargo |
|---|---|---|
| Institute Cargo Clauses (A) | All risks: any physical loss or damage except listed exclusions | High-value, sensitive goods, machinery, electronics, consumer products |
| Institute Cargo Clauses (B) | Named perils: fire, grounding, sinking, collision, water ingress, dropping during loading or discharge | Mid-value general cargo, bulk commodities |
| Institute Cargo Clauses (C) | Narrow cover: fire, explosion, sinking, collision, general average | Low-value bulk and scrap cargo |
Exclusions and Additional Cover
Under all three sets of clauses, inherent vice, insufficient packing, delay, wilful misconduct of the insured and war/strike risks are excluded as standard. War and strike risks can be added for an additional premium under the Institute War Clauses and Institute Strikes Clauses. Reefer cargo requires an extra clause for deterioration caused by refrigeration breakdown.
Policy Types
- Single voyage policy: Issued for one shipment; suitable for companies that export irregularly.
- Open cover (annual) policy: Covers all shipments over a period, with each consignment declared afterwards. Practical and economical for regular exporters and importers.
- Certificate of insurance: Issued per shipment under an open cover and presented to the bank under a letter of credit.
Tip: Set the insured value at the invoice value plus freight plus 10 percent anticipated profit (CIF + 10%). If the cargo is underinsured, only a proportional share of the loss is paid.
How Is the Premium Determined?
The marine cargo insurance premium ranges widely, from a few tenths of a percent to around one percent of the insured value, depending on:
- The nature of the goods and their susceptibility to damage
- Packaging and container type
- Route, transit time and number of transshipments
- Breadth of cover (Clause A, B or C)
- The insured's claims history
- Vessel age and classification status
Exact rates vary between insurers and with market conditions, so it pays to compare several quotes. Özd Global presents customers with cover options suited to their cargo type through the insurance intermediaries it works with.
What Is General Average?
This concept, unique to maritime law, means that sacrifices made deliberately for the common safety of ship and cargo (for example jettisoning containers during a fire, or salvage costs) are shared among all cargo owners in proportion to the value of their goods. When general average is declared, even the owner of undamaged cargo cannot collect it without providing a guarantee or cash deposit. Marine cargo insurance policies cover this contribution; uninsured cargo owners can face substantial payments. This alone is reason enough to take out a policy.
Steps to Take When Damage Occurs
- Record the damage on the bill of lading or delivery note at the time of receipt.
- Document it with photographs and video; do not destroy the packaging.
- Notify the insurer and the carrier in writing immediately; time limits are set in the policy.
- Wait for the insurance surveyor's inspection.
- Submit the invoice, packing list, bill of lading, damage report and survey report to claim compensation.
Özd Global supports customers through the claims process by gathering documents and handling correspondence with the carrier.
Integrating Insurance with Logistics Planning
Insurance is not only a compensation tool after a loss; it is part of risk management. Correct packaging, suitable container selection, VGM compliance and choosing a reliable carrier all reduce the likelihood of damage and improve premium terms. Within our sea freight service, we assess the insurance need for every shipment together with the customer, and during customs clearance we check that the policy meets letter of credit and declaration requirements. For large and out-of-gauge cargo, our project logistics team arranges special insurance conditions alongside the loading plan.
Frequently Asked Questions
Is marine cargo insurance compulsory?
It is not required by law; however, under CIF and CIP terms the seller is obliged to arrange cover, and banks require a policy under letters of credit. In other cases it is optional but strongly recommended.
Does the policy cover door to door or only the sea voyage?
The Institute Cargo Clauses provide "warehouse to warehouse" cover as standard, so inland transport, port waiting time and the sea voyage are all included. Make sure this scope is stated explicitly in your policy.
Can I claim if a container falls overboard?
Under Clause A, yes; under Clauses B and C, loss overboard or washing overboard is also generally among the named perils. Cover limits and deductibles vary by policy.
Marine cargo insurance is the most effective protection against unexpected losses in international transport. Based in Gebze, Özd Global evaluates your shipment plan alongside your insurance needs and helps you select the right cover. Reach us through our contact page for your next shipment or call +90 551 462 41 34.
