Essential Fact of the Month: Cargo Insurance Policies in International Trade

The extent to which cover is provided depends on the risks covered by the policy and on other factors:

• the commodity shipped (e.g. glass or china breakage is only insured on special terms);
• the destination (e.g. many insurers will not provide cover to some inland destinations in West Africa and insurance against theft risks to former Soviet countries may be restricted);
• the normal custom for a particular trade.

Standard cargo insurance generally covers the following risks:

(a) sinking or grounding;
(b) storm;
(c) fire or explosion;
(d) water damage;
(e) piracy;
(f) collision;
(g) average damage; 
(h) unlawful acts by the master or crew;
(i) theft or pilferage;
(j) damage/breakage from mishandling;
(k) jettison.

It should be understood that cover of the above risks may be adjusted by the insurer in relation to particular trades.

Risks which are not covered

The following risks are not covered as they are considered uninsurable factors:

(a) insufficient or unsuitable packing or preparation of the goods;
(b) loss of trade caused by delay;
(c) inherent vice (e.g. decay in produce);
(d) unseaworthiness of vessel (if suspected or known);
(e) financial loss;
(f) illegal cargo (e.g. drugs, pornography).