The Complete Guide to Cargo Insurance: Protecting Your Freight with Confidence

Introduction

In today’s volatile global supply chain, ensuring the safety of your shipments is more important than ever. At Daguer Logistics, we understand that cargo loss or damage can have a serious impact on your business. That’s why choosing the right type of cargo protection is critical. Whether you’re shipping a few pallets or managing full container loads across oceans, understanding your options can save you time, money, and stress.

In this comprehensive guide, we’ll explore the different types of cargo coverage available, how they work, their pros and cons, and how you can make the best decision for your freight and fulfillment operations.

Types of Cargo Cover

There are three main types of cargo cover you can consider when shipping goods, especially by sea:

1. Standard Ocean Bill of Lading (B/L)

2. Extended Liability Coverage

3. Cargo Insurance

What Is a Standard Ocean Bill of Lading?

The Bill of Lading (B/L) is a legal document issued by a carrier to acknowledge receipt of cargo for shipment. It serves as a contract between the shipper and the carrier. On the reverse side of every B/L are standard terms and conditions, typically derived from international rules such as the Hague-Visby Rules.

Liability and Limitations

Under these terms, the carrier assumes limited liability for any cargo damage. Compensation is usually capped at 2 Special Drawing Rights (SDR) per kilogram of gross cargo weight. SDRs are a unit of account defined by the International Monetary Fund and fluctuate with currency exchange rates.

Example:

If you ship 2,000 kg of electronics and the SDR value is $1.30, your compensation for total loss would be just $5,200, even if the cargo was worth $200,000.

What’s Covered?

· Physical damage due to equipment malfunction (e.g., leaking container)

What’s Not Covered?

· Fire

· Theft

· Delay

· Acts of God

The standard ocean B/L is always included with your shipment, but the protection is minimal.

What Is Extended Liability Coverage?

Extended liability coverage increases a carrier’s financial responsibility under certain conditions. It is often offered as an additional product by the shipping line or logistics provider.

Key Features:

· Broader protection than standard B/L

· Includes damages from delays, fire, or vessel malfunction

· Managed by the carrier’s extended liability claims team

· No third-party insurers involved

Example:

Let’s say there is a fire on board the ship. Under standard B/L terms, you would receive no compensation. With extended liability, however, you may be eligible for partial reimbursement up to a fixed ceiling (e.g., $50,000 or $100,000).

Limitations:

Extended liability is still not a replacement for full cargo insurance. It does not guarantee full-value reimbursement, and each provider has its own compensation cap.

Tip: Always review the terms and coverage limits with your provider before relying on extended liability.

What Is Extended Liability Coverage?Extended liability coverage increases a carrier’s financial responsibility under certain conditions. It is often offered as an additional product by the shipping line or logistics provider.

Key Features:Broader protection than standard B/L

Includes damages from delays, fire, or vessel malfunction

Managed by the carrier’s extended liability claims team

No third-party insurers involved

Example:Let’s say there is a fire on board the ship. Under standard B/L terms, you would receive no compensation. With extended liability, however, you may be eligible for partial reimbursement up to a fixed ceiling (e.g., $50,000 or $100,000).

Limitations:Extended liability is still not a replacement for full cargo insurance. It does not guarantee full-value reimbursement, and each provider has its own compensation cap.

Tip: Always review the terms and coverage limits with your provider before relying on extended liability.

What Is Cargo Insurance?

Cargo insurance offers the most comprehensive protection. Unlike extended liability, it is managed by an insurance company and provides reimbursement up to the declared value of your goods, regardless of fault.

What Does Cargo Insurance Cover?

· Loss or damage in transit (land, sea, air)

· Theft

· Fire

· Natural disasters (e.g., hurricane, flooding)

· Accidents (e.g., container falling overboard)

· War and civil unrest (if opted for in special clauses)

Why Cargo Insurance Is Essential:

In international shipping, carriers are rarely found liable. Without insurance, your business could bear the full burden of a loss event.

Coverage Types:

· All Risk Coverage: Covers most external risks unless specifically excluded

· Named Perils Coverage: Covers only risks specifically listed in the policy

· Total Loss Only (TLO): Applies only if the entire shipment is lost

Key Benefits:

· Full reimbursement based on declared cargo value

· Claims handled by professional insurers

· Peace of mind in complex multimodal shipments

Who Pays for Insurance?

This depends on the Incoterms® used in your shipping contract.

· FOB (Free on Board): Buyer is responsible

· CIF (Cost, Insurance, Freight): Seller provides insurance

· DDP (Delivered Duty Paid): Seller handles all costs, including insurance

Clarifying responsibility in your Incoterms agreement helps avoid misunderstandings and ensures the cargo is covered at every step.

How Daguer Logistics Helps You Protect Your Cargo

At Daguer Logistics, we offer:

· Custom cargo insurance solutions through trusted global partners

· Integrated coverage for LCL and FCL shipments

· Seamless claims handling support with documentation prep

· Optional extended liability programs tailored for budget-conscious shippers

· End-to-end visibility from pickup to final delivery

Whether you're shipping high-value electronics, retail goods, or perishable items, we help you choose the right protection based on your risk tolerance and shipping profile.

Common Mistakes to Avoid

1. Assuming the carrier is fully liable for loss or damage

2. Misunderstanding Incoterms® and assuming the other party is responsible

3. Under-declaring cargo value to save on premiums

4. Not reading the exclusions in cargo insurance policies

Always partner with an experienced 3PL like Daguer Logistics that offers transparent guidance and documentation compliance.

Final Thoughts: Choose the Right Coverage with Confidence

Every shipment you move is an investment. Protecting that investment is crucial for ensuring business continuity and customer satisfaction. Whether you're just starting your import-export journey or managing a high-volume supply chain, selecting the right cargo coverage can help you sleep better at night.

At Daguer Logistics, we simplify this decision-making process by offering flexible insurance options, risk assessment, and hands-on support every step of the way. Let our experts help you minimize risk, reduce liability, and ensure safe, on-time delivery of your valuable freight.

Need help selecting the best cargo protection? Contact Daguer Logistics today and protect what matters most.

Frequently Asked Questions (FAQs)

1. Is cargo insurance mandatory?

No, but it’s strongly recommended. Many ports and trade partners now expect proof of insurance.

2. What’s the cost of cargo insurance?

Premiums vary based on cargo value, risk level, destination, and coverage type. Typically, 1%-3% of the declared value.

3. Can I insure only part of my shipment?

Yes, but it’s not recommended. Under-insurance can limit claim payouts.

4. How long does a cargo claim take?

Most claims are resolved within 30-60 days, depending on documentation and insurer response time.

5. Do I need insurance for domestic shipments?

It depends on your risk exposure, but we recommend insuring high-value or sensitive cargo.