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International Cargo Insurance: A Solution to Shield Overseas Shipments

March 2, 2023
 By Jacob Lee
International Cargo Insurance: A Solution to Shield Overseas Shipments
Last Modified: January 2, 2024
Transporting freight internationally by air or sea can be dangerous. International cargo insurance will give you the protection you need.

International cargo insurance is the protection that shippers from all over the world use to protect their freight. There are many problems that can arise when shipping goods to another country that this form of insurance can protect shippers from. 

According to the World Shipping Council, the amount of cargo containers lost at sea increased between 2020 and 2021. Therefore, international cargo insurance is extremely important because it can protect shippers using ocean shipping, as well as international air shipping. This includes anything from extreme weather events to theft and piracy.

With the right international cargo insurance, shippers will be able to protect their freight from any dangers that threaten it. 

What Is International Cargo Insurance?

International cargo insurance is a broad term that’s used to describe policies that protect shipments of freight traveling overseas. There are two types of international transportation that this form of cargo insurance can protect from. 

These forms are:

  • Ocean shipping
  • International air shipping 

Certain insurance policies can be used for either ocean or international shipping, while other policies can be used for both. Another way international freight insurance policies differ from one another are the types of financial loss they protect against. 

The best type of cargo insurance coverage is one that applies to the shipper’s chosen mode of transportation and that protects from a financial loss that’s most likely to affect their freight. 

Palletized freight on a landing strip with a plane nearby

What Are the Risks of Shipping Cargo Internationally?

Every type of international shipping has slightly different risks associated with it. Before sending their goods into transit, shippers should be aware of these risks so they know which insurance policy will best suit them. 

Ocean Shipping Risks

Ocean shipping is the most commonly used method of international transport. Despite it being used so frequently, this type of service has plenty of dangers that could cause a financial loss for a shipper.

Some of the risks of ocean shipping include:

  • Piracy 
  • Damage
    • Spills
    • Leaks 
    • Goods could become crushed
    • Fire 
  • Containers falling into the sea
  • Cranes dropping cargo containers

Many ocean carriers have special procedures that ensure vessels are sailed safely. Shipping containers are also loaded very carefully to keep freight‌ from shifting while in transit. That said, there is still a risk that freight could suffer damage on its way to the final destination. 

Check out our article on piracy in marine insurance to learn more about this threat to ocean shipments. 

International Air Shipping Risks

International air shipping is another way to send goods to a foreign country. Shippers use this transportation service when they need to send commodities to another nation in a short period. International air isn’t used as often and because of that, many shippers are unaware of the risks associated with using this service. 

Some of these associated risks include:

  • Theft
  • Security 
  • Damage caused by dangerous goods
  • Turbulence damage

Theft typically occurs when freight is transported by truck, but there is still a chance that freight traveling via air can be stolen. Security threats could cause damage to freight as well. There have been instances where terrorists have attempted to send explosives internationally. While incidents where the explosives detonate are rare, the threat is still a possibility. 

Hazardous goods could pose a threat to the well-being of the freight as well. The International Air Transport Association (IATA) has numerous regulations regarding the transportation of hazardous materials. These regulations help prevent the chance that hazardous goods from leaking, spelling or exploding.

That said, an accident could still occur and cause damage to other shipments that have been loaded on the plane. Illegal shipments might make it past regulatory authorities as well. Despite a brief decline in international air shipments in 2020, air freight has increased in recent years. 

Air Freight Shipments (2017-2021)

YearAmount of Air Freight (in million metric tons)

Provided by Statista

With more shipments traveling by air, the higher the possibility that freight shipments will be damaged or lost due to the associated risks of air shipping.

We have an article on air cargo insurance statistics that show the size and importance of the industry.

A cargo port near a large city

What Types of Insurance Coverage Can Be Used For International Shipments?

There are many different types of insurance policies that can be used to protect freight. However, it’s often difficult for shippers to determine which ones can be used to protect cargo traveling internationally. We’ve broken international insurance coverage policies down by mode of transportation to make them easier to understand.

Ocean Coverage

Freight traveling by ocean can be protected with two different types of cargo insurance coverage. 

These include:

All-risk insurance offers the broadest form of coverage that a shipper can use. As the name implies, this form of coverage protects from all the potential dangers that could cause loss or damage. While all-risk insurance provides broad coverage, the tradeoff is that it’s more expensive than named perils. 

The reason for this is that named perils insurance only provides protection from specific types of risks. This policy allows shippers to protect their freight from specific dangers that are more likely to occur rather than protecting freight from all dangers.  

You can learn more about all-risk and named perils in our article on ocean cargo insurance coverage.

International Air Coverage

Insurance policies for air cargo are fairly similar to the insurance policies for ocean shipping. There are about three different types of insurance that shippers can obtain for their air shipments.

These policies include:

  • Partial coverage 
  • Full-risk

Partial coverage is similar to named perils insurance for ocean shipping. This policy will protect air freight at risk from specific dangers and can reimburse shippers 60 percent of the total inventory value of their freight. Full-risk coverage will protect international air freight from all dangers.

There are other forms of air cargo insurance that can protect freight during the entire duration of its journey. This means that air cargo will still be protected after it’s unloaded from a plane and loaded onto a truck.  

An airplane waiting to be loaded with air freight

How Do Incoterms Affect International Cargo Insurance?

There are 11 different types of Incoterms, but only two of them deal with insurance. Both carriage and insurance paid to (CIP) and carriage, insurance and freight (CIF) require the shipper to insure the shipment of freight. 

These Incoterms can affect international cargo insurance by nullifying any insurance coverage provided by the buyer. The reason for this is that these two Incoterms dictate that the shipper is responsible for insuring the freight during certain parts of the shipping process. 

For example:

  • CIP dictates that shippers provide insurance for freight until it reaches the named place of destination
  • CIF dictates that shippers provide insurance until the shipment reaches the port of destination

Place of destination refers to the agreed upon location where freight will arrive. The port of destination is simply the port where the goods will make entry into the buyer’s country. Any damage or loss that occurs before the freight arrives at the place of destination in the case of CIP or the port of destination in the case of CIF will have to be covered by the shipper.

Therefore, any insurance the buyer has will not be applicable prior to these scenarios occurring. However, if CIF is the agreed upon Incoterm, buyers will be able to insure the shipment after it arrives at the port of destination.  

Our article on what is cargo insurance coverage discusses the CIF and CIP Incoterms in detail. 

Do I Need Insurance For International Shipping?

Obtaining insurance for international shipments of cargo isn’t required unless the shipper and buyer agree on Incoterms that require coverage for the shipment. Even if an Incoterm isn’t agreed upon, shippers and buyers alike should have insurance coverage for their international shipments.

There are many different dangers and risks for both ocean and international air freight shipments. Whether the insurance coverage protects against all risks or just a few, it’s best for freight to have some level of protection instead of none.

Shield Your Shipments With Freight Insurance Coverage

When you ship with Freight Insurance Coverage, your goods will receive a supreme amount of protection. We do this by providing insurance coverage to all shipments that are booked with us. In our quote forms, the cost of insurance is immediately factored into the total cost of the shipment. 

This allows our customers to view a more accurate amount of how much money they’ll be spending when they ship with us. If you’re ready to ship freight with the protection it deserves, then fill out your quote or reach out to our team at (866) 975-0749 if you have any questions or concerns. 

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