Updated 05/30/23


For many consumers, buying a protection plan is an immediate, hard “no.” Shoppers quickly calculate the risk of damage to their new purchase and decide it’s not worth the extra cash. This fuzzy and rushed math performed at the cash register might be fine for a new stereo but should be taken more seriously when a company’s inventory is on the line.

If you think about marine cargo insurance just like a consumer electronics protection plan, you can get yourself in trouble.

After all, for many companies, significant loss and damage to goods can significantly impact a bottom line.

Why Do You Need Marine Cargo Insurance?

If you’re newer to shipping goods via ocean freight, you may wonder why you need marine cargo insurance at all. Every business’s insurance needs are different, but, overall, it comes down to the following reasons:

Risk of Significant Financial Loss

To put it plainly, marine cargo insurance protects you from losing your shirt if the cargo you’re shipping is lost, damaged, or destroyed. At this point, you might be wondering:

Wouldn’t the ocean freight carrier be responsible for reimbursing me if my container slid off their ship (for example)?

It’s not quite that simple. Before the 1893 Harter Act, ocean freight carriers weren’t responsible for damages to or loss of cargo. Before the act was passed, carriers simply wrote clauses that released them from any liability.

However, the Harter Act changed that to:

  • Define the responsibilities of ocean freight carriers, including operating a seaworthy ship, proper loading, handling, and caring for cargo.
  • Prevent carriers from including clauses that relieved them of specific types of liability. In other words, it made carriers responsible for fulfilling the duties named in the act, and in the case of negligence, offered shippers recourse.

However, the Harter Act also made a concession to the ocean freight carriers. The act recognized that carriers could not be held liable in circumstances beyond their control. What circumstances would that entail, exactly? We’ve included the actual language below so you can see exactly what the law covered:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:

  1. Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship;
  2. Fire, unless caused by the actual fault or privity of the carrier;
  3. Perils, dangers, and accidents of the sea or other navigable waters;
  4. Acts of God;
  5. Acts of war;
  6. Acts of public enemies;
  7. Arrest or restraint of princes, rulers, or people, or seizure under legal process;
  8. Quarantine restrictions;
  9. Act or omission of the shipper or owner of the goods, his agent or representative;
  10. Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, That nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier’s own acts;
  11. Riots and civil commotions;
  12. Saving or attempting to save life or property at sea;
  13. Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods;
  14. Insufficiency of packing;
  15. Insufficiency or inadequacy of marks;
  16. Latent defects not discoverable by due diligence
  17. Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier

But then came the 1936 Carriage of Goods by Sea Act (COGSA), which governs ocean freight shipments entering or leaving the U.S.

Under COGSA, ocean carriers were allowed to limit their liability to $500 per package. Although the meaning of the word “package” has been debated by many legal teams, it can ultimately mean only a $500 reimbursement for the entire container.

For example: what happens when your 1,000lb solar panel worth $1,200,000 is only covered for $500? That’s where marine cargo insurance comes in.

Purchasing additional freight coverage can mean the difference between full replacement value vs only $500. Protecting your investment with marine cargo insurance will protect you from significant financial loss.

Costs of a General Average Incident

We’ll need to dip into maritime law one more time to explain the concept of general average—and how marine cargo insurance can assist in this challenging situation.

General Average: Property that is voluntarily sacrificed to preserve the remainder of the property from destruction (as by throwing cargo overboard or cutting away masts to preserve the ship in a storm). The owners of the property saved must contribute to the owners of the property sacrificed in such an amount that all will have contributed proportionately to the aggregate value of the lost property. (Source)

In other words, if there’s some sort of disaster onboard, an ocean freight carrier can declare general average. In this case, you may be liable for a share of the total loss. Additionally, a general average declaration may require you to post a bond or a payment in order to get your cargo released.

Certain types of marine cargo insurance will assist with both of these scenarios: the payment and the expedited release of the cargo. If you find yourself in a general average scenario, you’ll be glad to have that marine cargo insurance policy in effect.

Contract Requirements

Finally, depending on the contract you negotiate, you may be responsible for insuring your ocean freight shipment, either by purchasing marine cargo insurance or by self-insuring, if appropriate.

If you’re using Incoterms within your contract, there are two that specify insurance requirements:

Make sure to check your contract carefully before making a final decision around marine cargo insurance. That’s especially true if you’re using the CIP Incoterm, which has specific requirements in terms of how much coverage you obtain. Now that you understand why marine cargo insurance is so important to your business, let’s talk about the nitty-gritty: exactly what it covers.

What Marine Cargo Insurance Covers

Simply put, marine cargo insurance covers your goods for any loss or damage . While each policy might vary on the details, the main point of ocean freight insurance is to protect you and your company from suffering significant financial loss.

There are a few different types of cargo insurance policies which you should consider. Knowing which type of policy best suits your business requires knowing your full scope of work and the risks involved in your specific move and industry.

Items Commonly Needed for a Marine Cargo Insurance Quote

  • Type of goods being shipped
  • Value of goods
  • Origin and destination
  • Mode(s) of transport, including carrier names
  • Packing details
  • Loss history

Since marine cargo insurance covers goods over the ocean, it protects your bottom line against fire and loss at sea. It even covers damage due to weather. After all, rough seas can cause damage to items from being tossed and jostled around inside containers.


Many policies can also be customized to cover the risks specific to how you do business. For example, if appropriate for your business, talk to your agent or provider about policies that:

  • Start coverage at the origin point, even if that’s a land-based warehouse
  • End coverage at the final destination, such as another warehouse
  • Includes any other modes of transit that goods pass through, including rail and truck


Finally, there are two broad types of marine cargo insurance you’ll want to consider:

Marine Cargo Insurance Providers and Resources


Now that you know the basics of what a marine cargo insurance policy covers, it’s time to find a partner. A quick Google search will yield plenty of potential providers for marine cargo insurance. Like any other insurance policy or protection service, it’s important to explore your options before choosing a provider thoroughly.


Ask for recommendations. Your colleagues and trusted business associates are a great place to start your research. Talk to:

  • Your freight forwarder, if you’re using one. They can usually connect you with an insurance solution.
  • Your ocean freight carrier, if you’re working directly with them.
  • Fellow shippers who also send cargo via ocean freight, to see if they have personal experience with a particular carrier or insurance agent.

Ultimately, the  more information you gather on your prospective insurer, the more likely you are to find the right coverage—at the right price.


Need some guidance on your next steps? Reach out to one of our ocean freight experts. To be fully transparent with you, our team members are not licensed insurance professionals. However, if you’re interested in adding marine cargo insurance to your next ocean freight shipment, we’d be happy to point you in the right direction. 

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