Cargo Insurance: Who Pays When Goods Are Damaged During Transport?
- Katelyn McKeone
- 14 hours ago
- 3 min read
Transporting goods can be a lengthy process, and various complications can arise along the way. It often feels easier to hope that problems will not occur, but this is not a sustainable approach.
A pallet may be damaged, goods may be stolen, or exposed to rain or other weather conditions. All of these situations lead to financial losses, but who ultimately covers the cost?
In this article, we will look at cargo insurance and how it can help protect your business from financial losses.
Are logistics partners responsible?
Handing goods over to a logistics partner does not eliminate risk. It simply changes its form and where it may appear.
During transportation, goods are exposed to various risks:
Damage during loading or unloading
Theft during transit
Weather-related damage
Accidents or handling errors
Even when a carrier is involved, their liability is limited. Under the CMR Convention, which forms the basis of most transport contracts, the carrier’s liability is strictly limited, including financially to just 8.33 SDR (~10 EUR) per kg.
This means the financial impact does not always fall where companies expect. If the carrier has followed all regulations but a problem still occurs, your company may have to cover the losses..
When is your business responsible?
Contract terms
The agreement between the buyer and seller defines responsibility at each stage of delivery.
Example: the contract states you are responsible until delivery to your client → the goods are damaged during transport → your company covers the loss.
Delivery terms (Incoterms)
International trade terms, known as Incoterms, define which party assumes risk during transport.
Example: if you agree on terms where risk transfers only upon delivery → even if a carrier is used, the risk remains with your company for most of the journey.
Point of risk transfer
This is the exact moment when responsibility shifts from one party to another.
Example: risk transfers after loading → goods were improperly secured before that → responsibility may remain with your company.
In many cases, companies take on risk without realizing it, especially in international shipments involving multiple stages and partners.
Carrier liability vs cargo insurance
This is where confusion most often arises.
Carrier liability:
Limited and regulated
Often significantly lower than the actual value of the goods
Applies only under specific conditions
Cargo insurance:
Covers the value of the goods
Applies to a broader range of risks
Provides predictability in financial outcomes
Cargo insurance
If a company has well-structured cargo insurance:
Management knows when the company is financially responsible
Unexpected losses do not disrupt cash flow
Decisions are made with full awareness of risk
Operations are not based on hope that everything will go smoothly
What does cargo insurance cover?
Physical damage to goods
For example, damage during transport, handling, or accidents
Theft or loss
Goods stolen or lost during transit
Damage during loading and unloading
One of the most common risk points
Transport accidents
Road accidents, maritime incidents, and more
Weather-related damage
Rain, humidity, or other external conditions
How much does cargo insurance cost?
Cargo insurance is often more affordable than companies initially expect.
It is usually calculated as a small percentage of the goods’ value:
Approximately 0.1% to 0.5% of the shipment value
The price depends on:
Type of goods (fragile, high-value, perishable)
Mode of transport (road, sea, air)
Route and destination
Previous loss history
Example:
If the value of goods is €50,000, insurance may cost approximately €50 to €250.
This is often the point where companies shift their approach, comparing predictable costs with unpredictable losses.
Does this apply only to large companies?
No. The need for cargo insurance depends on:
The value of goods
Frequency of shipments
How critical the delivery is to business operations
Even a single shipment can have a significant financial impact.
Conclusion
Every company that moves goods faces uncertainty. Each stage of transport introduces new risks.
Many companies do not realize that even when a logistics partner is involved, it does not always cover all losses. Responsibility depends on contracts, circumstances, and legal limitations, and compensation often does not reflect the actual value of the goods.
As a result, companies typically take one of three approaches: hope that problems will not occur, budget for potential losses, or choose cargo insurance to protect their financial results.
The difference is not whether something can go wrong.
The difference is whether the outcome is controlled and predictable.
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