Cargo insurance – what should you know? An insurance expert explains

Did you know that relying solely on a carrier’s liability insurance can be a costly mistake? Adam Pająk, insurance expert at Transbrokers, explains what cargo insurance really is, who it’s for, and what the consequences of not having it can be.

What is cargo insurance, and how does it differ from carrier’s liability insurance?

“Cargo insurance is insurance for goods in transit. That’s the simplest definition,” explains Adam Pająk from Transbrokers. “It’s a form of protection created specifically to safeguard the interests of the cargo owner.”

Goods in transit are exposed to numerous risks—damage, destruction, or even loss—which is why insurance is meant to protect the party who would suffer a financial loss. “To put it plainly: it’s meant for the person or business that would be affected if something happened to the cargo,” the expert emphasizes.

It’s crucial to distinguish cargo insurance from a carrier’s liability insurance policy. As Pająk points out, “Carrier’s liability insurance covers the carrier’s civil liability, not the cargo itself. It only comes into play if the carrier is proven to be at fault. But that’s not the same as insurance that directly protects the value of the goods.” He adds, “Insuring high-value cargo solely with the carrier’s liability policy—or relying on it entirely—is a serious mistake.”

He warns that the carrier is not always legally responsible for damages during transit. And even when they are, “the compensation is often limited”—especially in international road transport under the CMR Convention, where the maximum liability is calculated based on the weight of the goods, not their value.

Who is cargo insurance for?

“Primarily, it’s for the party with an insurable interest—that is, the one who would suffer a loss if something happened to the goods,” says Adam Pająk. Cargo insurance can also be arranged by freight forwarders acting on behalf of their clients. While the forwarder isn’t the beneficiary of the policy, they can still conclude the contract in the client’s interest.

“There’s a common belief that carriers shouldn’t be the ones arranging cargo insurance, but I disagree,” Pająk continues. “A carrier may have a legitimate reason to set up such a policy—not for their own benefit, but on behalf of their client. According to clause 15 of the London Institute Cargo Clauses, a carrier cannot insure their own interest in the cargo, but can insure the interest of another party. This is closely tied to the concept of insurance subrogation—but that’s a more advanced topic.”

Why is cargo insurance still so rarely discussed?

“This type of insurance has often been seen as just another cost—something that increases the total cost of transport,” says Adam Pająk from Transbrokers. He adds, “There used to be more awareness, but over time, Excel spreadsheets took over. On one side of the sheet is the cost of the policy; on the other, no visible benefit—until a loss occurs.” As a result, companies have increasingly abandoned cargo insurance and instead expanded their carrier liability coverage, assuming it would suffice.

According to the expert, this is a serious misunderstanding. “The first party that should consider cargo insurance is the one that owns the goods—whether a manufacturer, supplier, or importer. They can take out the policy themselves or require the freight forwarder to arrange it. Sometimes it’s pushed onto the carrier, but realistically, the insurance a carrier needs is a properly tailored carrier’s liability policy. In most cases, that’s sufficient to meet their specific obligations.”

Who’s responsible if there’s no cargo insurance?

Let’s say a carrier is transporting €100,000 worth of electronics from France to Poland. They park at an unsecured rest area in Germany, and the cargo is stolen. There’s no cargo insurance. Who’s at fault?

When goods are stolen—say, electronics worth €100,000—the key question is whether the carrier complied with the terms of their liability insurance policy. Adam Pająk explains: “The carrier should first check if their policy required them to park only at secure facilities. If it did, and they ignored that requirement, they’re in trouble. Even if legally responsible, the insurer may deny the claim due to policy violations.”

“In practice, recovering €100,000 from a carrier can be very difficult,” Pająk continues. “So the party suffering the biggest financial loss is usually the owner of the goods. They would have been able to recover that loss—if they had a valid cargo insurance policy. But they didn’t.”

While the carrier may face consequences, the burden typically falls on the cargo owner. “There’s no single answer, but the reality is clear: the cargo owner ends up with the bigger problem.”

What does cargo insurance cover? Is there a standard cargo policy?

“There’s really no such thing as a single, ‘standard’ cargo policy,” says Adam Pająk. Coverage depends on the agreed terms—whether domestic or international—and whether the policy follows the Institute Cargo Clauses developed in London. The expert highly recommends using these international clauses, especially in cross-border shipping.

“This is the global standard—known as Clauses A, B, and C,” he explains. Clause A (the ‘all risks’ option) offers the broadest protection. It covers damage during loading, unloading, transport, and more. And importantly, it doesn’t require additional approvals to be valid for most common risks.

How much does cargo insurance cost?

There’s no universal price. “It’s like asking how much a car costs. It depends,” says Adam Pająk. The price is based on cargo value, type of goods, theft risk, and claims history. “For example, electronics are more attractive to thieves than food or neutral goods,” he explains.

Still, the cost is relatively low—often a small percentage of the cargo value. “For €100,000 worth of goods, you might pay just a few hundred euros,” says Pająk. “The real question isn’t ‘How much does it cost?’ but ‘Can I afford not to have it?’” Especially when carrier liability (e.g., under CMR) may only offer symbolic compensation for high-value, low-weight items like branded clothing or smartphones.

How do you buy cargo insurance?

“There are several ways to get this type of insurance,” says Pająk. Generally, there are two main approaches: an annual cargo insurance policy or a single-shipment policy.

Annual policies are typically used by manufacturers, importers, or exporters who ship regularly. They’re designed to cover all shipments over the course of a year with minimal administrative work. Single-shipment policies are more common for ad hoc shipments arranged by carriers or freight forwarders. However, Pająk notes, “It’s increasingly difficult to find insurers offering single policies, because premiums are low but potential losses can be significant.”

Conclusion: do we really learn from our mistakes?

Fortunately, yes—more often than before. But still not often enough. That’s the short answer to whether companies are learning from past mistakes when it comes to cargo insurance. “People often say: ‘We’ve never had a loss. What could possibly go wrong?’” says Adam Pająk. “But unforeseen events are the most dangerous—because they’re, by definition, unpredictable.”

He adds with a smile, “When I hear that, I often quote Winnie the Pooh: ‘A catastrophe is a funny thing. You never have one until you do.’ That pretty much says it all.”