Marine Cargo Insurance: Cargo vs Hull, Risks and Clauses

Marine cargo insurance protects the cargo owner’s money at the most exposed stage of a deal — while the consignment moves through the port and across the sea, out of your direct control. The cover splits into two different products: cargo (insuring the goods themselves, “warehouse to warehouse”) and hull (insuring the ship’s body — the shipowner’s concern, not the shipper’s). Below: what a cargo policy actually covers, how Clauses A, B and C differ, who is obliged to insure the goods under Incoterms, what general average means, and which documents to keep ready when importing through the Odesa hub.

Cargo and hull — two different policies

These two are often confused. Hull insurance covers the vessel: the body, machinery, equipment and tackle — the interest of the shipowner or charterer. Cargo insurance covers the consignment during carriage and transhipment, and it is the exporter or importer who arranges it. For a cargo owner the working tool is cargo cover; hull only enters the picture indirectly, through general average (more on that below).

A cargo policy usually covers the goods on a “warehouse to warehouse” basis: liability starts at the sender’s warehouse and ends at the consignee’s, including transhipment in the port, temporary storage and multimodal legs. That matters for sea shipments, where the goods change hands several times: vessel, berth, terminal, road transport.

What the policy covers: Clauses A, B and C

In international practice the scope of cover is set by the Institute Cargo Clauses, marked with letters:

• Clause A (“all risks”) — the widest cover. It pays for any accidental damage or loss of the goods except what is expressly excluded (war, strikes, natural deterioration, the shipper’s wilful misconduct, inadequate packing).
• Clause B — mid-level: a closed list of risks including fire, stranding, collision, capsizing, ingress of sea water, washing overboard.
• Clause C — minimum cover: only major events — wreck, fire, explosion, collision, stranding, general average. Minor damage and theft are not covered.

The “lower the letter”, the cheaper the policy and the narrower the protection. For expensive, fragile or consolidated cargo it makes sense to take Clause A; for homogeneous bulk cargo that is physically hard to “slightly damage”, B or C is sometimes enough. What decides is the risk profile of the specific cargo, not the price of the policy.

Who must insure the cargo: the Incoterms rules

Who pays for the policy is set by the delivery term under Incoterms 2020. Only two terms carry a direct obligation to insure the goods:

• CIF (Cost, Insurance and Freight) — the seller pays for insurance in the buyer’s favour, but only the minimum: Clause C is enough.
• CIP (Carriage and Insurance Paid To) — in the 2020 edition the seller must provide the maximum Clause A cover for 110% of the cargo value.

On all other terms (FOB, CFR, EXW, DAP, etc.) there is no formal duty to insure — and this is where a gap most often appears: each side assumes the other bears the risk. The rule is simple: see at which point the risk of loss passes to you, and insure exactly your leg. The official wording is available from the International Chamber of Commerce (ICC).

General average — why everyone pays

General average is an ancient maritime principle: if, to save the ship and the cargo, the master deliberately makes sacrifices or incurs costs (jettisons part of the cargo, puts into a port of refuge, fights a fire), the loss is shared among all parties to the voyage in proportion to the value of their property. In other words, even if your container is undamaged, you can still receive a general average contribution claim.

Without a policy such a contribution comes out of your own pocket, and until it is paid or a guarantee is provided the cargo is not released from the terminal. A cargo policy with general average cover closes this risk — the cargo is released faster. The calculation is made under the York-Antwerp Rules by an average adjuster.

What documents you need and how to arrange cover

The basic set for a cargo policy on a sea shipment:

• the foreign trade contract and the commercial invoice (to assess the sum insured — usually cargo value + freight + 10%);
• the packing list and a description of the goods, their nature and type of packing;
• the transport document — the bill of lading for sea, with CMR or other waybills added for multimodal;
• the route and mode of transport on each leg, and the transhipment points.

The policy is arranged before carriage begins — you cannot insure cargo that is already in transit or already damaged. When a loss occurs, documentation matters: a damage report at the terminal, photos, a note in the transport documents, prompt notice to the insurer. The cleaner the paper trail, the faster the payout.

Where insurance sits in the sea delivery chain

When importing and exporting through Ukraine’s active hub — Odesa, Chornomorsk, Pivdennyi — the cargo passes several handovers: vessel call, discharge, transhipment, customs, removal. Each handover is a potential point of damage or delay. It helps when the policy, the carriage and the clearance are run as one chain: data on the cargo and the timing is not lost between contractors. Dragon Maritime accompanies the cargo from the ship’s arrival in Odesa to delivery to the consignee: cargo insurance protects the consignment during carriage and storage, freight forwarding runs the logistics across the legs, and customs clearance closes the release in port.

Frequently asked questions about marine cargo insurance