A container leaves the port undamaged and arrives with three pallets crushed and water damage across two more. The exporter assumed the shipment was insured. It was — but only against total loss, because the policy in place was minimum cover, and the survey report needed to support a partial-damage claim was never commissioned. Cargo insurance for export is not a single product with one level of cover: it is a contract that has to be matched to the Incoterm, the cargo and the route, or it pays out on paper only.
Who Arranges Cargo Insurance and When It Must Be Placed
Under CIP and CIF, the seller has the contractual duty to buy insurance for the buyer’s benefit, though only to the minimum level the Incoterms rules require unless the contract says otherwise. Under FOB, CFR, EXW and the other terms without an “I” in them, arranging cargo insurance is the buyer’s decision, and buyers frequently skip it or under-insure to save on premium. Anyone shipping under these terms should read the chosen Incoterm as carefully as the price clause — as covered in our guide to the four Incoterms that actually matter for a first export — because it determines who carries the exposure if the cargo is damaged before risk transfers.
Whoever is responsible, the policy has to be placed before the goods leave the exporter’s premises, not after the bill of lading is issued. Cover arranged retroactively, once a loss is already likely, is void.
What the Institute Cargo Clauses Actually Cover
Most cargo insurance for general goods is written under the Institute Cargo Clauses (A), (B) or (C). Clause (C) is the narrowest: fire, explosion, vessel sinking or capsize, and general average — it will not pay for water ingress into a container or for packages that simply go missing. Clause (B) adds a wider set of named perils, including washing overboard, entry of sea or river water, and total loss of a package during loading or unloading. Clause (A) is all-risks cover, subject to the standard exclusions (inherent vice, inadequate packing, wilful misconduct, delay), and it is the level most exporters actually need for cartons, pallets and anything that can shift, crush or absorb moisture over a long transit.
The CIF and CIP minimum required by Incoterms 2020 is Clause (C). If the buyer needs more than that, it has to be agreed and paid for separately — it will not happen by default.
The 110% Rule
Marine cargo insurance policies are conventionally written for 110% of the CIF invoice value, not the invoice value itself. The extra 10% is meant to cover freight, insurance cost and a margin for the buyer’s lost profit or handling costs if the shipment has to be replaced. Declaring only the ex-works value, or forgetting to add freight and duty when the buyer self-insures on import, is one of the most common under-insurance mistakes — and it only surfaces once there is already a claim to make.
Making a Claim
An insurer will ask for a defined set of documents, and gathering them after the event, once a container has already been unpacked and moved, is far harder than gathering them at the port. Before accepting the cargo, the consignee should:
- note any exterior damage on the delivery receipt or bill of lading at the time of unloading, not later
- request a survey from an approved surveyor before the goods are moved or repacked
- keep the packing list, commercial invoice and bill of lading together with the survey report
- report the loss to the insurer within the time limit stated in the policy, which is usually short
A claim without a contemporaneous survey report is the single most common reason insurers reduce or reject payment, whatever the clause in place.
Matching the Certificate to the Letter of Credit
When payment runs through a letter of credit, the insurance certificate becomes a compliance document as much as a risk-management one. Banks check the sum insured, the clause, the currency and the named beneficiary against the credit’s terms, and a mismatch is treated the same as any other discrepancy — as with the documents described in our piece on choosing between a letter of credit and documentary collection. Producing the certificate alongside the other shipping documents, rather than as an afterthought once the container is loaded, avoids a rejection that has nothing to do with the condition of the goods.
Your Own Policy or the Forwarder’s Cover
Most freight forwarders will offer to add insurance to the quote as a convenience. It is worth reading what is actually being sold. In many cases this is cover under the forwarder’s own liability terms, which caps compensation at a fixed amount per kilogram of the shipment — a figure that is usually far below the commercial invoice value of the goods, particularly for higher-value processed food or manufactured products. That is a liability limitation, not cargo insurance. When you are choosing a freight forwarder for West Africa, ask directly whether the insurance on offer is a genuine marine cargo policy against invoice value, or the forwarder’s own capped liability. If it’s the latter, buy a separate policy from an insurer or broker, ideally one with experience of the specific route and port of destination.
Buying cover without overpaying for it
Occasional exporters are usually better served by a single-shipment policy taken out per voyage. Manufacturers shipping regularly to West Africa tend to move onto an open or annual cover instead, insuring every shipment automatically under one set of terms rather than arranging a policy each time. Either way, get a quote from a broker before you quote a CIF price to a buyer, so the premium is built into the price rather than absorbed afterwards. And before you assume a route or a port is covered as standard, read the exclusions — the parts of the policy that determine whether a claim is paid are rarely the parts anyone reads first.
Before the Next Shipment Leaves
Cargo insurance only earns its premium if it is arranged for the right clause, before the right deadline, and backed by paperwork prepared before anything goes wrong. Confirm which party carries the obligation under the agreed Incoterm, ask for Clause (A) unless there is a specific reason not to, insure 110% of CIF value rather than the invoice figure alone, and put the survey step into the standard unloading procedure instead of treating it as optional.
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