Carriers are not responsible for the full value of your cargo. If a container goes overboard or a pallet is crushed, the shipping line pays a legal minimum that is usually a fraction of what the goods cost you. Cargo insurance closes that gap for far less than most importers expect.
What Carrier Liability Actually Pays
Sea and air carriers limit their liability under international conventions, not by the value on your commercial invoice. Under the Hague-Visby Rules, a sea carrier's liability is capped at 666.67 SDR per package or 2 SDR per kilogram, whichever is higher. For air cargo, the Montreal Convention limit rose to 26 SDR per kilogram on 28 December 2024. One SDR is an IMF unit of account worth roughly USD 1.36 in 2026.
Liability also depends on proving the carrier was at fault. General average, heavy weather and packing defects can leave you recovering nothing at all.
The Three Institute Cargo Clauses
Marine cargo policies are written on Institute Cargo Clauses. Clause A is all-risks cover, the widest and the standard choice for most commercial shipments. Clause B and Clause C are named-perils cover: they list what is insured, so anything not on the list is not paid. Clause C is the narrowest and cheapest.
Cargo is normally insured at CIF value plus 10 percent. The extra 10 percent covers duty, freight and lost profit.
Worked Example: 500 kg, 3 CBM, Karachi to Dubai
Goods worth USD 30,000 on 10 pallets are destroyed in transit.
- By sea (Hague-Visby): 10 x 666.67 SDR = 6,667 SDR, against 500 x 2 SDR = 1,000 SDR. The higher figure applies, so about USD 9,070.
- By air (Montreal): 500 x 26 SDR = 13,000 SDR, about USD 17,680.
- With Clause A cover at CIF plus 10 percent (USD 33,000), a premium near 0.3 percent costs about USD 99, and the claim is paid in full less the deductible.
Ninety-nine dollars protects the twenty-one thousand the carrier will never pay you.
Common Mistakes
- Assuming the freight forwarder's liability insurance covers your goods. It does not.
- Insuring only the invoice value and forgetting duty and freight.
- Buying CIF and relying on the supplier's minimum Clause C policy.
- Reporting damage after the notice deadline written into the policy.
Expert Tips
- Declare the correct value; under-insurance triggers average clauses that cut the payout.
- Ask for Clause A unless the cargo is bulk, scrap or second-hand.
- Photograph container seals and cargo condition at delivery, before signing anything.
- Note visible damage on the delivery receipt immediately, even if the extent is still unclear.
Frequently Asked Questions
Is cargo insurance mandatory in Pakistan?
Not for most shipments, but banks commonly require it when the shipment is financed under a letter of credit.
What does cargo insurance cost?
Typically 0.2 to 0.5 percent of the insured value, depending on the commodity, packing and route.
Does buying CIF mean I am covered?
CIF obliges the seller to buy only minimum cover, normally Clause C. Ask for Clause A in writing if you want real protection.
Can I insure cargo after it has shipped?
Some open policies allow it, but never once a loss is already known. Arrange cover before departure.
Are delays covered?
No. Standard marine policies exclude delay and loss of market.
Carrier liability is a legal floor, not protection. Pioneer Express arranges marine and air cargo cover alongside your freight forwarding and customs clearance, so the risk is priced with the shipment rather than after it. Request a quote and we will quote the insurance with your freight.