Marine Cargo Insurance: Who Pays When Cargo Is Lost, and What ICC (A/B/C), CIF, and CIP Actually Cover

From the moment cargo is loaded onto a vessel until it arrives, accidents like water damage, breakage, and theft can happen at any time. Marine cargo insurance is what makes you whole when they do. The catch is that in practice you often end up in a state where the risk has already passed to you under Incoterms, yet no one has actually bought a policy. When the party bearing the risk has no insurance, the loss falls entirely on them.

What Is Marine Cargo Insurance?

Marine cargo insurance covers loss or damage to goods while they are in transit. It is most associated with sea freight, hence the common name, but it also covers air and multimodal shipments. When the insured party suffers a loss from an event such as sinking, stranding, collision, fire, jettison, breakage, or loss overboard during the voyage, they are paid out within the scope the policy defines.

The key point is that, unlike freight or duty, cargo insurance is a choice, not an obligation. That is why who buys it, and on what terms, varies from contract to contract, and the rules that decide this come from Incoterms.

Institute Cargo Clauses ICC (A)(B)(C): What They Cover

The scope of cargo insurance is defined by the Institute Cargo Clauses (ICC) drawn up by the Institute of London Underwriters. The current standard comes in three forms, ICC (A), ICC (B), and ICC (C), which differ in both the scope of cover and how liability is framed.

ICC (A) is all-risks cover: it covers every fortuitous loss unless it falls under a listed exclusion. Being an all-risks basis, the defining feature is that you ask "what is not covered" rather than "what is covered."

By contrast, ICC (B) and ICC (C) cover only the perils named in the clause, on a named-perils basis. A loss from a cause not on the list is not paid. ICC (C) is the narrowest of the three, covering only major casualties such as sinking, stranding, fire, and collision, so its premium is the lowest. Frequent losses like breakage, theft, and leakage often go uncovered under ICC (C), so choosing a clause suited to the nature of the cargo matters.

Why Is the Insured Amount 110% of CIF?

How much should you insure for? The practical standard is 110% of the invoice (CIF) value, that is, the value of the goods plus 10%. The CIF and CIP Incoterms require the seller to insure for at least 110% of the contract value, and the international practice for letter-of-credit transactions uses the same benchmark.

The reason for 110% is to cover, on top of the value of the goods (100%), the expected profit and incidental costs (10%) the buyer counted on when a loss occurs. If you were only reimbursed the value of the goods, you would not recover freight and lost expected profit, so adding 10% is the standard. The parties can agree to a higher figure if needed.

You have to establish the CIF value, which is the basis for the customs value, before the insured amount falls out. You can check the CIF value and the duty that follows from it with the CIF import duty calculator.

Who Buys the Policy? Incoterms Decide

The point that trips people up most in cargo insurance is "who bears the risk, and who buys the insurance." These are two separate things, and they differ by Incoterm.

Under CIF the seller buys insurance, but is only obliged to go as far as the minimum ICC (C) cover. Since the risk has already passed to the buyer at the port of loading, if the cover is narrow it is safer for the buyer to take out additional insurance. The trap in CIF's split between the cost point and the risk point is covered in detail in the CIF term.

This is where the key change in Incoterms 2020 sits. CIF kept the minimum ICC (C) cover, but CIP was raised to the maximum ICC (A) cover. CIP, used for container, air, and multimodal transport, now requires the seller to insure at the all-risks level. That is why the cover level under the CIP term, used across all transport modes, is now higher than under CIF.

The problem lies with FOB, CFR, and EXW. These terms place no duty to insure on the seller. The buyer bears the risk, and if no one takes out a policy, there is nowhere to recover from when a loss occurs. If you import on FOB, the rule is that the buyer takes out cargo insurance directly. You can see the risk-transfer point and who insures under each term at a glance with the Incoterms comparison tool.

Period of Cover: Warehouse to Warehouse

The standard transit clause of cargo insurance sets the period of cover as from the shipper's warehouse to the consignee's warehouse (warehouse to warehouse). That means it covers the entire transport leg, not just while on board at the port of loading, from the moment the goods leave the origin warehouse until they are unloaded at the final destination warehouse.

That said, cover ends once a set period passes after arrival or the goods are removed for another purpose. If the inland transport or transshipment legs are long, check on the policy whether the cover actually spans those legs.

When Something Goes Wrong: The Claim Procedure

Cargo insurance claims differ from ordinary insurance claims in one decisive respect. When the actual cause of the cargo loss lies with the carrier, you must preserve the right to claim damages against that carrier. If you fail to preserve this right, the insurer cannot exercise subrogation (the right to pursue the carrier in the insured's place), and the payout can be refused.

The practical sequence is as follows.

1. Notify immediately on discovery: as soon as you discover the loss, notify the insurer or the claim agent named on the policy.
2. File a written claim with the carrier: give written notice of the loss to the shipping line, airline, or carrier to preserve the right to claim damages. If anything looks off when a container is opened, photograph its condition before opening and have the driver confirm it.
3. Request a survey: if the loss is large, use a surveyor's survey report to establish the cause and extent of the loss objectively.
4. Prepare documents: assemble the original policy, the commercial invoice, the bill of lading (B/L) or air waybill (AWB), the packing list, the accident report, the survey report, photos of the damage, and the claim letter sent to the carrier.
5. File and settle the claim: after loss adjustment, you are paid within the scope of the policy.

The crux is to preserve the right against the carrier first, right after the loss. Drag your feet and the deadline to claim damages passes, subrogation is blocked, and you can lose the insurance payout too.

Common Mistakes in Practice

• Risk has passed but no policy was bought: on FOB, CFR, or EXW imports, the buyer forgets to insure and is exposed with no cover.
• Minimum cover on cargo that needs more than ICC (C): for cargo prone to breakage or theft, picking ICC (C) on premium alone means no payout when a loss actually occurs.
• Insuring only the value of the goods (100%): you fail to recover expected profit and incidental costs. 110% is the standard.
• Not filing a claim against the carrier: failing to give the shipping line written notice after a loss blocks subrogation and gets the payout refused.

Who should buy the insurance under your trade term, and where the risk passes, starts with Incoterms. The full comparison of all 11 terms is covered in the Incoterms 2020 complete guide.

This guide is general information as of July 2026. Scope of cover, exclusions, and insuring conditions differ by insurer and policy, so confirm your actual policy and claims with the insurer's clauses and a professional.