Yearly cargo policy, or per shipment, what is best for you?

If you are an importer or exporter, one of the things you must think about is cargo insurance. In some select circumstances cargo insurance is not your worry, but often it is your worry. 

When is cargo insurance not your worry?


The first instance is if you are buying goods from overseas delivered to your door as an importer. This is often done using the Incoterm DDU (Delivered Duty Unpaid, Named Destination) for ocean shipments. In short, the seller takes the expense and risk of delivering the goods to the buyer’s door, not including the duty. If the destination door is the clearly named the place, then cargo insurance will be the burden of the seller until that point.

Does DDU often happen? Not really. Sellers don’t often have, or want, the resources to sell you things at your door. Importers sometimes shy away from buying DDU because of possible inflated inland transport costs, but it is a more worry-free way of buying things. You would not have to worry about cargo insurance and risk as the importer.

The next way to shunt some of the responsibility of cargo insurance away from you is called CIF (Cost, Insurance, and Freight, to named port of destination). In this case, the seller is obliged to provide the freight expense, cargo insurance, and the inventory, usually + 10%, to your port of entry in the US. This is the most common Incoterm used in imports, but as an importer it is not without pitfalls. As importer, be aware the cargo insurance stops at the port of entry. From there on, it is now your risk. Moreover, once the seller provides the cargo insurance, your relationship for claims or anything related to the insurance is now with the insurer selected by the seller, not the seller.

It is your job as the buyer to know who is providing your coverage and claims services if needed.  When crafting the deal, ensure the insurance is confirmed ICC Clause A cover and provided by a major well know insurer with a verifiable claims network in your country, in this case the US, it will be worth your due diligence. Importers favor CIF because it often gets them the best of both worlds. They get to be fairly hands-off until the cargo hits the port of entry, and then they get to route their own cargo thereafter carving the most economical inland costs for that portion of the transit. It makes for good economics and flexibility in case the cargo needs to be routed to an alternate inland destination.


Flipping the script, if you are an exporter, if US importers favor CIF to buy things, overseas buyers will see the same benefits of CIF and favor it also. As a US based exporter, you hold the risk for the cargo from origin to loading at the port of exit where the buyers risk begins, but it is also where cargo insurance you purchase on the buyer’s behalf, naming them loss payee, starts and covers their risk all the way to the port of entry of the buyer.

What are your options as an exporter? If you buyer is at all savvy, they will require the cargo insurance meet certain benchmarks just as I suggested importers use for their imports. This business reality leaves what cargo insurance you are buying guided by the terms of the deal. Now, you as the exporter, only must tend to, from who, and how?

From whom is and easy one. Me comes to mind. If not me, choose an established provider who uses well known insurers with global reach and claims agents worldwide. Avoid amazingly cheap sources as they are cheap for a reason.

‘How’ is a bit more complicated. To know how, you must examine your own business needs and what is best for you. While there are hybrid models such as monthly reporting, by far the two most common ways to secure your needed cargo insurance is per shipment and yearly policy. Let us start with the most basic, per shipment cargo insurance.

Per Shipment

If you export one container a month with a value of $50,000USD, per shipment cargo insurance may be best for you.  While per shipment tends to be higher cost dollar for dollar insured, there are no yearly policies, and the insurance is only purchased on a as needed basis. Each time you make a shipment, you order a cargo insurance certificate to cover it and you should receive a cargo insurance certificate for each shipment. If you are now doing per shipment insurance and your volume is growing, it may be time to investigate a yearly cargo insurance policy.

Yearly Cargo Policy

In the event you ship more frequently and keeping track of each shipment’s cargo insurance becomes draining, consider securing a yearly cargo insurance policy. In this case the insurer examines your current shipping volume, origins, destinations, and values, and calculates a premium to cover all shipments during the policy period and can adjust the premium yearly based on your needs. Yearly cargo insurance is most always less cost per dollar insured and the tracking of each shipment is no longer needed.

Whether yearly policy or per shipment fits you best, is based on your needs and shipping volume. You can take for granted insurer’s will not be eager to create a yearly policy for low volume shipping. Whether your shipping would be a good fit for a yearly policy can be answered by asking for a quote. No reputable vendor will, or should ever, charge for quoting your business. If a source does mention any sort processing fee to obtain a cargo insurance quote, they should absolutely be avoided.

If you are an air cargo or LTL ground shipper, I am not ignoring you. Many of the same rules I mentioned in this piece apply to you as well.  If your company has questions about risks and your specific needs, do not hesitate to contact me at TJO Cargo, I would be happy to help.