One container dropped overboard in a storm. One seawater-damaged electronics shipment. One fire in a warehouse halfway to Rotterdam. For buyers importing from China, a single uninsured loss can wipe out an entire year’s profit on a product line. Yet cargo insurance is the most underrated line item in the landed-cost spreadsheet.
If you have ever asked “do I really need marine insurance if my supplier ships under CIF?” or “what does All Risks actually cover?”, this guide walks you through the three main cover types, how insured value is calculated, the right moment to place cover, and exactly what to do when a claim happens.
The three core marine cargo covers: FPA, WPA and All Risks
Traditional ocean cargo policies are sold in three ascending levels of cover. Understanding the difference is the single most important step in buying the right policy.
- FPA (Free of Particular Average) — the most basic cover. It pays out on total loss of the cargo, and on major accidents such as the vessel sinking, catching fire, colliding, or stranding. Partial, accidental damage to your bags is generally not covered unless it follows one of those major events. FPA is cheapest but leaves you exposed to the most common mishaps.
- WPA / WA (With Average / With Particular Average) — sits between FPA and All Risks. It adds partial damage caused by the major perils above (for example, seawater damage during heavy weather). Many policies apply a deductible (“average”) such as 3–5% on the claim.
- All Risks — the widest cover, corresponding to the modern Institute Cargo Clauses (A). Despite the name, it is not literally “everything”: it covers all accidental physical loss or damage from an external cause (breakage, crushing, water, theft in transit), while excluding inherent vice, delay, ordinary leakage, and unsuitable packaging. For most importers of finished consumer goods, All Risks is the sensible default.
Air-freighted cargo follows the same logic but is usually insured under an air cargo clause that mirrors All Risks cover for the airborne leg.
How much should you insure: the 110% rule
Cargo policies are normally written for 110% of the CIF invoice value — that extra 10% is the standard margin intended to cover your expected profit and incidental costs. The 100% base reimburses the goods and freight; the 10% buffer stops a loss from becoming a double loss on the deal.
If your goods have risen in market value, or you are shipping under FOB where you have already added inland trucking, duties and handling, you can negotiate a higher insured amount. Just remember: you cannot recover more than your actual insurable interest, and under-insuring means a claim pays out proportionally less.
When to place cover, and who arranges it
Place the policy before the cargo ships, ideally the moment the seller confirms the goods are ready. Most policies include a warehouse-to-warehouse clause that protects you from the supplier’s factory warehouse all the way to your nominated destination warehouse — but that protection only exists if the policy is in force before the goods leave.
Who arranges it depends on your Incoterms:
- FOB, EXW or FCA: you, the buyer, hold the risk from the loading point. You must arrange your own cargo insurance — do not assume anyone else has.
- CIF or CIP: the seller is contractually required to buy cover, but it is usually only the minimum (often CIF 110% and basic cover). As the buyer, you should still verify the policy exists, check the named beneficiary, and consider topping it up for All Risks.
You can buy cover either through your freight forwarder (convenient, usually a small per-shipment fee) or directly from a marine cargo insurer or broker (better rates for frequent shippers, and a master/open policy for recurring lanes).
How a cargo claim actually works
If cargo arrives damaged, follow these steps before the haulier leaves your door:
- Note the damage on the delivery receipt and take dated photos and video of the outer packaging and the goods before signing. A clean signature can weaken a claim.
- Notify the insurer (or your forwarder) immediately. Most policies require prompt notice, and for serious loss the insurer will appoint a surveyor to inspect the cargo.
- Preserve the packaging and the goods — the surveyor will want to see how the damage happened.
- File the claim packet: the original bill of lading, commercial invoice, packing list, insurance certificate, delivery receipt, survey report, and your claim value.
Act within the inspection window agreed with the carrier, and keep records of any salvage or disposal. Claims are normally settled within a few weeks once the survey is accepted.
The bottom line
For the cost of a fraction of a percent of your shipment value, cargo insurance turns an uninsured catastrophe into a reimbursable event. Match the cover level to your cargo (All Risks for finished consumer goods), insure at CIF plus 10%, buy before the vessel sails, and keep a clean claims file. Shipping from China without it is a bet most importers lose only once.