The Importance of Cargo Insurance

The key role of cargo insurance cannot be overlooked, especially against the backdrop of frequent accidents. While incidents such as ship sinkings may not make the headlines, their occurrence is more frequent than expected—approximately 350 ships sink each year. Additionally, smaller incidents like container leaks, cargo shifts, theft, and failure to deliver can also lead to significant economic losses. Recent explosion events have shown that even if the cargo is not directly damaged, indirect losses can have a substantial impact.

It is important to note that under the Carriage of Goods by Sea Act (COGSA), the liability of carriers (including the main carrier and non-vessel operating carriers) is limited and only covers specific risks, excluding force majeure events such as natural disasters. For instance, the liability limit for maritime carriers is $500 per package, while for air carriers, it is $9.07 per pound, and local carriers typically offer $0.50 per pound. These limited compensations are often insufficient to cover the actual value of the cargo, especially when there are significant differences in deductibles, exclusions, and coverage in insurance policies.

When calculating the insured amount, the following insurance amount options can be selected based on the client’s or letter of credit (L/C) requirements:

Invoice Amount Only (Commercial Invoice Value)


Invoice Amount + 10% Additional Coverage

Invoice Amount + Freight


Invoice Amount + Freight + 10% Additional Coverage

Here is a specific calculation example:

Insurance amount selected by the client: The client requires the insurance amount to be ‘Invoice Amount + Freight + 10% Additional Coverage.’

Calculating the insured amount:

Invoice Amount: $100,000
Freight: $5,000
After adding the invoice amount, freight, and 10% additional coverage, the insured amount is $115,500.

Calculating the insurance premium:

The rate table shows that the rate for general cargo is 0.35% (i.e., $0.35 per $100 value).

The insurance premium is calculated as $115,500 × 0.35% = $404.25

LINKWAY provides cargo insurance services for every client, helping to reduce risks and protect your interests. If you have any questions about cargo insurance or international logistics, please feel free to contact us via email at Haven@linkway-freight.com. We will provide you with the most professional advice and services.

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