Cargo Insurance


It is most important that every shipment carries full cargo insurance. Many companies mistakenly believe that in the event something happens, they can claim full value from the carrier.

However carrier’s liability is severely limited, typically to USD 500 per unit shipped by ocean (1 unit is normally 1 container) and USD 20 per kg if shipped by air.

All freight charges must be paid in full before any claim against the carrier can be started.

This is where cargo insurance comes into play. For a very small cost, Highland can help arrange full cargo coverage, from door to door, usually with no deductible. Cargo can be insured for 110% of CIF or even DDP value.

We only work with reputable insurers (such as Lloyds) and each claim will be handled professionally and quickly. We have excellent experience in claims handling and payments.

Many clients try to save money by not insuring or underinsuring cargo. However, this is not an area to try to save a few dollars.

Why insure 110% and not 100%?

This is the most commonly asked question. The insurance companies allow you to use the additional 10% to help in expediting production of the replacement, or to help pay for airfreight of the new part, or to pay penalties for late deliveries. It is a standard formula embedded in all letters of credits and terms of worldwide business.

A few of our clients were not aware that they could ensure for 110%. After their shipment sustained damage in a violent winter storm on the ocean, they were relieved to have 10% to pay for shipping the replacement.

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What Incoterm should be used for value calculation?

Some clients only request insurance calculated on exworks value of the product, but the insurance must reimburse all expenses you would pay in case of loss.  Transportation must always be paid, even if goods are lost or damaged in transit. The same is also true for the actual insurance premium. CIF or DAP value should be used for these reasons.

If you are responsible for paying duty overseas (DDP), you must consider insuring the duty amount as well. Imagine a scenario where cargo is cleared through customs in foreign port and it is damaged on the truck before reaching the final destination.  The duty was already paid and it will not be refunded just because the goods are now damaged.  Properly structured insurance that included the duty payment will provide full coverage.

What is General Average?

General Average is a legal term referring to situations where a ship is in danger on the high seas and must spend certain sums of money or undertake actions to save the vessel and/or majority of the cargo. This can happen in situations where the ship’s captain is forced to let some containers go overboard to save a ship; or the engine breaks down and a new one must be flown to the vessel; or the vessel must be towed to port. In these cases a “General Average “ is declared and the extra costs are prorated to all cargo on the vessel based on the cargo value. The cargo will not be released before this additional payment is made.

This can be a big surprise to most exporters and importers.  The process of legally getting your cargo from under “general average” can be lengthy and expensive.

Fortunately if you have proper cargo insurance, it covers the general average and the insurer will handle all the paperwork to get the cargo released as well as all payments.

This is true peace of mind and an area overlooked by many companies, both large and small.

Do not ship without insurance and do not under-insure.  Talk to one of our well trained professionals about how to do this right and be always covered at a very small competitive cost.

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