Marine Insurance

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Shipping businesses are exposed to a great number of named and unnamed perils which can cause huge financial consequences. Accidents, natural disasters, regulatory risks, manhandling, market volatility, security risks, operational risks, geopolitical tensions, etc. are a few risks to name. It is essential for businesses to have a freight cargo insurance cover to navigate through these risks effectively. 

What is freight cargo insurance?

Freight cargo insurance is a type of marine and cargo insurance that gives coverage for the merchandise that is being shipped from one location to another. This includes both domestic and international shipping of goods. It gives financial protection against the liabilities arising from loss of or damage to the goods that are being shipped. 

There are various types of freight cargo insurance depending on the coverage type that is needed. Businesses can go for comprehensive all-risk cover or total loss cover or coverage for named perils depending on their need. This insurance can be availed by anyone involved in the shipping business such as shippers, logistic companies, and the freight forwarding shipping company. 

When you are buying freight cargo policy, it is important to understand the terminologies and the key difference between these important terminologies. ‘Indemnity’ and ‘damages’ are the two most commonly used terms in insurance. Let us understand the difference between indemnity and damages in freight cargo insurance

Indemnity in freight cargo insurance

The principle of indemnity in freight cargo insurance refers to financial security. The insurance company promises to pay the loss suffered by the insured party to the extent of damage or as per the limits of the insurance policy. Basically, in an indemnity policy contract like freight cargo , the policy company restores the financial position of the insured to its original position which was before the loss suffered. However, policy takes into consideration the market value of goods, depreciation applicable, and policy limits while compensating for the loss. Let us understand the concept of indemnity with an example.

Let us assume XYZ company ships electronic goods from India to another country via sea. During transit, goods worth INR 25,00,000 suffer total damage due to a natural disaster. Let us assume the company has availed of freight cargo insurance. As per terms of policy, the insurance company compensates the insured company with the actual loss suffered i.e. INR 25,00,000. Compensating the loss restores the financial position of the XYZ company to its position before the loss occurred. Compensating for the loss is referred to as indemnity in freight cargo policy.

Damages in freight cargo insurance

Damages in freight cargo refer to the amount of compensation awarded by the court for the loss or damage suffered in an insurable event due to negligence of a third party involved in the shipping business. 

For example, let’s say a company exporting perishable goods hires a shipping company to transport the goods to another country. Perishable goods require proper care and the shipping company needs to ensure goods reach the destination in a useable condition. Let’s say company suffers a loss of INR5,00,000 due to negligence of shipping company as goods are spoiled during transit. In this case, company exporting goods can claim compensation for damages from shipping company holding them responsible for their negligence. 

Freight forwarders and logistics companies can also avail of cargo legal liability insurance. It safeguard themselves financially against liabilities arising from damage or loss to cargo. Contingent cargo legal liability insurance also provides coverage for legal fees and settlements. Intermediaries like freight brokers can avail of this type of cargo policy. Freight broker contingent cargo insurance cost can depend on various factors like the client’s business nature, size of business, and the limit of coverage they are seeking to avail. 


To sum up, freight cargo policy plays a vital role in the shipping industry by providing financial protection to parties involved against various perils during transit. Understanding the terminologies and principles of freight cargo helps you make a better choice and rational decision.

About The Author


MBA Insurance and Risk

With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.