Guides
Ocean marine and cargo insurance: how shipment and vessel coverage works
Marine cargo insurance covers goods door to door under the Institute Cargo Clauses. What A, B and C cover, why carrier liability falls short, how claims run.
Ocean marine insurance is the group of coverages for ships and what they carry: cargo for the owner of the goods, hull and machinery for the vessel, protection and indemnity (P&I) and marine liability for legal liability, and freight for shipping charges. For most businesses the one that matters is marine cargo insurance, which pays for loss of or damage to your goods in transit, usually on an all-risks basis, because the carrier's legal liability is far smaller than the value of what it carries.
Why the carrier's liability is not enough
Under the Carriage of Goods by Sea Act (COGSA), a carrier's liability on shipments to and from U.S. ports is limited to $500 per package, or per customary freight unit for goods not shipped in packages, unless the shipper declared the nature and value of the goods before shipment and the value is in the bill of lading (COGSA, 46 U.S.C. 30701 note). The statute also relieves the carrier of responsibility for losses from causes such as fire (unless caused by the carrier's actual fault or privity), perils of the sea, acts of God and acts of war. And it sets two deadlines: written notice of loss within three days of delivery if the damage was not apparent, and suit within one year after delivery.
Hypothetical example. A manufacturer ships one crated machine worth $85,000 on the carrier's standard bill of lading. The crate is dropped during discharge. Without a declared value, the carrier's COGSA limit is $500. A cargo policy insured at 110% of invoice, or $93,500, would instead pay the repair or replacement cost, subject to the deductible. Then the insurer, through subrogation, pursues the carrier, which is why the policy requires you to preserve your rights against it.
A second reason is general average. When a ship's master sacrifices cargo or incurs extraordinary expense to save the voyage, every cargo owner contributes. Cargo cannot be released until the owner posts security. Marine cargo policies cover those contributions; see general average: what it means for shippers and cargo owners.
The coverages inside "ocean marine"
| Coverage | What it insures | Typical buyer |
|---|---|---|
| Marine cargo | Goods in transit, from the seller's warehouse to the buyer's, by ocean, air, rail or truck | Importers, exporters, distributors, manufacturers |
| Hull and machinery | The vessel and its equipment | Shipowners, operators and lenders |
| Protection and indemnity (P&I) | The shipowner's third-party liabilities: crew injury, cargo claims, collision, pollution, wreck removal | Shipowners, usually through mutual clubs |
| Marine liability | Terminal, stevedore, marine contractor and similar liability to third parties | Terminal operators, marine contractors, charterers |
| Freight | Shipping charges at risk if the cargo is lost | Carriers, forwarders, sellers on some terms |
Crew injuries are a separate regime. The Jones Act and the Longshore and Harbor Workers' Compensation Act (see Jones Act, USL&H coverage and USL&H, the Jones Act and maritime employers liability explained) govern seamen and dock workers, and a vessel owner needs coverage written for them.
Cargo coverage: the Institute Cargo Clauses
Most marine cargo policies incorporate the Institute Cargo Clauses of 1 January 2009: Clauses (A), (B) and (C). The text below is from published copies of the clauses, for example Clauses (A). Your policy may amend them.
| Clause | Basis | What it covers |
|---|---|---|
| (A) | All risks | All risks of loss of or damage to the goods except as excluded |
| (B) | Named perils | Fire or explosion; vessel stranded, grounded, sunk or capsized; overturning or derailment of a land conveyance; collision; discharge at a port of distress; earthquake, volcanic eruption or lightning; general average sacrifice; jettison or washing overboard; entry of seawater, lake or river water; total loss of a package lost overboard in loading or unloading |
| (C) | Named perils, narrower | Fire or explosion; stranding, grounding, sinking or capsizing; overturning or derailment; collision; discharge at a port of distress; general average sacrifice; jettison |
All three cover general average and salvage charges and the "both to blame" collision clause. The (A) clause is broad, but it carries these exclusions (Clauses 4 to 7):
- wilful misconduct of the assured;
- ordinary leakage, ordinary loss in weight or volume, and ordinary wear and tear;
- insufficient or unsuitable packing or preparation where the assured or its employees did it, or it was done before the insurance attached (stowage in a container counts as packing, and independent contractors are not "employees");
- inherent vice, meaning the nature of the goods;
- delay, even if caused by an insured peril;
- insolvency or financial default of the vessel's owners or operators that the assured knew of or should have known;
- nuclear weapons;
- unseaworthiness or unfitness of the vessel or container, where the assured knew; and
- war, capture and seizure (piracy excepted), strikes, riots, civil commotion and terrorism.
War and strikes are bought back by adding the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo). If your goods move through a region with active conflict or disruption, ask whether war cover is included, what the cancellation notice is and whether the policy limits cover while cargo sits in the port.
Warehouse to warehouse. Under Clause 8 cover attaches when the goods are first moved in the warehouse to load for transit, continues through the ordinary course of transit, and ends on unloading at the final warehouse, or on unloading at another warehouse that you elect to use for storage or distribution, or 60 days after discharge at the final port, whichever comes first. Delay beyond your control and carrier-permitted deviations do not end it. If your buyer delays pickup at the port, tell your broker before day 60.
Open policy versus single shipment
A single-shipment policy or certificate insures one voyage. An open cargo policy is the annual arrangement for businesses that ship regularly: it covers all shipments within its terms, subject to a limit per vessel or conveyance, with shipments reported and premium adjusted. Open policies issue certificates that can be assigned to a buyer or presented to a bank under a letter of credit. Most buyers insure at the invoice value plus freight and a markup, commonly 10%, for the anticipated profit; Clause 14 of the Institute Cargo Clauses addresses additional "increased value" insurance. Ask your broker for the valuation basis in writing.
Your policy only pays if you have an insurable interest at the time of loss (Clause 11), which depends on the sales contract. See incoterms and who insures goods in transit for who must insure under each trade term. The clauses also say the insurance is subject to English law and practice (Clause 19), so ask your broker how the policy handles governing law and where suit may be brought.
What to do when cargo arrives damaged
- Note it on the delivery receipt. Visible damage should be written on the receipt at the time.
- Give the carrier written notice. For damage that is not apparent, written notice is due within three days of delivery under COGSA.
- Notify your insurer or its claims agent at once. Arrange a survey before the goods are moved or repaired.
- Mitigate and preserve rights. Clause 16 makes it your duty to take reasonable measures to avert or minimize loss and to ensure that rights against carriers and other third parties are preserved.
- Assemble documents. The bill of lading, commercial invoice, packing list, survey report, photographs and correspondence with the carrier.
- Watch the one-year suit deadline against the carrier, counted from delivery.
Who writes it, and the market
NAIC data put 2025 U.S. ocean marine direct premiums written at $5.35 billion. The five largest groups were AIG ($803.0 million), Starr Insurance Companies ($431.9 million), Chubb ($368.8 million), Travelers ($337.0 million) and Tokio Marine ($316.5 million), about 42% of the line combined. Globally, the International Union of Marine Insurance reported on September 22, 2026 that 2025 marine premium income was $42.6 billion, with cargo the largest class at $24.2 billion, and described a market that remains soft across most lines once currency effects are removed (IUMI). Soft conditions mean you may have room to negotiate terms such as war cover, deductibles and reporting, but they say nothing about your own account. A single claim on an open policy can change both the price and the appetite at renewal.
Not the same as the customs bond
Importers also need a customs bond. It is a surety bond that guarantees duties and fees to U.S. Customs and Border Protection, not insurance on the goods. CBP's February 2024 guide to bond amounts sets the minimum for a basic continuous import bond at $50,000 or 10% of the duties, taxes and fees for the previous 12 months, whichever is greater. See surety bonds explained: how they differ from insurance.
Key takeaways
- The carrier's liability under COGSA is $500 per package unless you declared a value, which is why shippers buy cargo insurance.
- The Institute Cargo Clauses (A) cover all risks except listed exclusions; (B) and (C) cover named perils only.
- War and strikes are excluded and must be added; coverage runs warehouse to warehouse, with a 60-day limit after discharge at the final port.
- Preserve your rights against the carrier: give written notice within three days for hidden damage and sue within one year.
- Cargo coverage and customs bonds are different products.