One of my favorite sections of websites I visit is the frequently asked questions, or FAQ. I usually learn a lot when I browse those, including some things it never occurred to me to ask. When I think about how complex marine cargo risks can be, and the kinds of questions I often get from insurance agents, brokers and their insureds, it seemed only natural to offer an FAQ on ocean cargo.

Isn’t ocean cargo basically like motor truck cargo insurance?

No, it sure isn’t. One might think that cargo is cargo, no matter the mode of transport. But, in fact, ocean cargo insurance is distinct from motor truck cargo policies. Marine cargo insurance is first-party protection for the shipper, whereas motor truck cargo insurance provides third-party liability protection for transportation firms. Put another way, motor truck cargo policies protect the trucking company against losses that result from the trucking company’s actions. Ocean marine cargo insurance protects the cargo owner regardless of who is at fault, and is typically an all-risks form of coverage. Among other differences are:

  • Forms. There is no “generic” ocean cargo form. Each insurance company has its own form or forms, and terms and conditions vary from company to company. Motor truck cargo policies can be either an industry form, or a proprietary company form.
  • Regulations. Marine cargo is subject to various international laws and agreements, which outline the responsibilities of parties to transactions and limit the liability of those transporting goods via air or sea. Overland transportation is governed by different, and generally fewer, regulations. There can be some overlap in ocean marine cargo and inland marine cargo exposures, and sorting those out requires specialized knowledge.

My client only does business in the United States. Does my client really need ocean cargo insurance?

Sometimes businesses have ocean cargo exposures that aren’t easy to see at first glance. For example, a manufacturer might not import materials for its domestic operations but sells the completed products to customers in Alaska, Hawaii, Puerto Rico or other locations. Whenever products are transported through international airspace or international waters, the shipper has a marine cargo exposure. Insurance agents and brokers should ask questions about an insured’s business to identify potential marine cargo exposures, to ensure those are addressed.

If my freight carrier has insurance, why do I need it?

For starters, a freight carrier’s liability typically is limited to some amount per package, pound or another measure. Secondly, that limitation and any insurance the freight carrier might have are likely much less than the shipper’s potential loss. How? Freight carriers typically buy coverage based on their estimated overall liability per conveyance (e.g. vessel, truck or aircraft), not on the value of specific items, and the amount they buy might only cover a rough percentage of the value. In addition, other shippers or cargo owners whose cargo is involved in the same incident may also make claims on the freight carrier’s insurance limits and quickly exhaust them. To ensure adequate protection, a shipper or cargo owner should buy marine cargo coverage for the value of their own cargo and allow underwriters to subrogate, or collect back from the responsible party.

What are INCOTERMS and why are they important for cargo owners?

INCOTERMS, an acronym for international commercial terms, is published by the International Chamber of Commerce. It is a set of rules for that defines the responsibilities of sellers and buyers in the delivery of goods under sales contracts. Shippers worldwide use INCOTERMS to spell out who’s responsible for the shipping, insurance and tariffs on an item. These terms of sale are commonly used in international contracts, though INCOTERMS do not always specify who is responsible for purchasing cargo insurance. The ICC has introduced an update to INCOTERMS in 2020, a decade after they were last updated. I’ll discuss that in more detail in a future article, so please stay tuned.

What happens if…

…I don’t insure my cargo for the full value?

The short answer: you might have to pay out of your own pocket for a share of the loss. Valuation is a critical consideration for shippers and cargo owners. A standard method is to base valuation of cargo on invoice cost, but that has some downsides for a shipper’s financial interests. Here’s a classic example: goods that are seasonal such as, say, Christmas trees. If a shipper’s seasonal goods are damaged in transit, the shipper could experience a big financial loss. The commercial value of seasonal goods is often greatly diminished once the season is over. To protect against such a risk, the cargo valuation should consider all of the costs associated with a potential claim. Another consideration is coinsurance, in which the insured shares some percentage of the loss with the insurer. Some ocean cargo policies waive coinsurance under specific circumstances, while others don’t.

…General Average is declared?

General Average is a long-held principle in maritime law, in which cargo owners share proportional responsibility for losses that arise from voluntary actions at sea. A freight carrier may declare General Average in cases where extraordinary efforts are necessary to preserve the maritime venture. For example, a fire in the cargo hold can damage the goods on board but also jeopardize the lives of the crew and result in the loss of the vessel. If the freight carrier makes the emergency decision to flood the cargo hold to extinguish the fire, some cargo is likely to suffer damage. Here’s the challenge for cargo owners: it can take a long time to determine the extent of damage associated with saving the voyage to determine their share of responsibility, and to retrieve any of the cargo on board. Under General Average, even if a cargo owner’s own goods are not damaged, in the event of a loss at sea that impacts the entire voyage, the cargo may not be released from the ship until the cargo owner or its insurer confirms the ability to pay its share of the expenses in General Average.

…War causes damage to cargo?

In most property policies, war risk is excluded. In all-risk marine cargo policies, however, war risk is covered under a separate policy form, attached to the cargo policy. A separate cancellation clause for cargo is invoked in cases of war risk, and insurers sometimes offer to reinstate coverage for additional premium. Knowing where cargo is going, or coming from, is important to determine exposure to war risk and ways to protect against losses.

Have other questions about marine cargo risk and insurance? Let’s talk. Please visit our product page or contact me at

In upcoming articles, we’ll explore many more facets of ocean cargo risk. Climb aboard for a voyage of discovery.

About Author

Julie Vogele, AMIM
Senior Marine Underwriter at Tokio Marine America
Julie Vogele, a senior marine underwriter with Tokio Marine America, has been underwriting all lines of ocean marine insurance in California for more than 30 years, with a specialty in ocean cargo insurance. She was among the first to earn the Associate in Marine Insurance Management (AMIM) designation from The Institutes in December 1998. Active in the marine insurance industry, Julie has served as past president of the Board of Marine Underwriters of San Francisco and still serves as a member of the BMUSF Board of Directors. She is currently on the Executive Committee of the Association of Marine Underwriters of San Francisco, where she has been president four times. She has also served on the Pacific Coast Advisory Committee for the Inland Marine Underwriters Association. Julie has guest lectured at the California Maritime Academy several times, been an instructor for the AMIM program and presented for the Inland Marine Underwriters Association and the Association of Marine Underwriters of San Francisco.

About Tokio Marine America

As part of our commercial ocean marine product offering, cargo owners and shippers are well served by unmatched financial strength, dedicated underwriting experts, and a suite of flexible and proprietary insurance products that can be tailored to fit your needs.

With over a 100-year history in the U.S., Tokio Marine America (TMA) offers tailored products to a diverse range of customers – from small to large-sized global businesses seeking traditional multi-line coverage, to larger private and public companies requiring full risk management solutions. Our commitment to providing the highest level of service is paramount. More than 93% of our customers recommend TMA based on our superior claims service. TMA is one of only three insurers with an A++ (Superior) XV rating from A.M. Best. With a solid foundation of financial stability, our strength lies in understanding your business and working in partnership to exceed your expectations.

By offering fully integrated solutions to meet our customer’s needs, we endeavor to deliver ANSHIN – safety, security and peace of mind to all our customers.

Tokio Marine America (TMA) is the marketing name for Tokio Marine America Insurance Company (TMAIC).