Cargo Insurance

What Is Marine Cargo Insurance, And Why Is It Important?

cargo insurance

Understanding the importance of marine cargo insurance, and how it works is vital to ensuring that your shipment is protected from loss or damage. 

It may seem obvious that one will need a policy if their cargo is carried by sea. However, there are many individuals who do not understand the underworkings and the processes involved.  

Fortunately, this article seeks to explain the key aspects of marine cargo insurance and its nuances for any business to consider.

What is marine cargo insurance?

It is a specialised type of insurance that covers goods being transported by sea. The insurance policy covers the loss or damage of goods during transit from the port of origin to the port of destination.

Types of marine insurance policies

  • Freight Insurance: This marine insurance type primarily covers an operator who loses freight receivables, or if the goods were damaged in transit.
  • Marine Cargo Insurance: This marine insurance policy covers goods dispatched from the country of origin to the country of destination.
  • Liability Insurance: This type of insurance provides compensation if a ship collides or crashes.
  • Hull Insurance: Covers damages and accidents to the transportation vehicle’s hull and torso. 

How does marine insurance work?

Marine insurance works by transferring the responsibility for a product’s damages from the exporter to the insurer. The policyholder typically pays a premium to the insurance company, and in turn, the insurance company agrees to pay a specified amount in the event of a covered loss.

To activate the coverage, the policyholder must file a claim with the insurance company providing evidence of the loss and the value of the goods involved. They will then investigate the claim and, if it is covered under the policy, pay the policyholder the agreed-upon compensation.

In practice, the terms of the coverage, like the types of losses, covered and the amount of compensation, are specified in the insurance policy. As such, the policyholder should always carefully review the agreement to understand what is and is not covered, as well as the limits of the coverage.

Why is marine cargo insurance important?

 Marine cargo insurance is important for several reasons:

  • Protection against financial loss: Shipping is a risky business, and marine cargo insurance provides financial security in the event of damage to the products. It helps mitigate the financial risk involved in shipping goods, allowing the insured to recover their investment to a certain extent.
  • Coverage for damages during transportation: Marine cargo insurance provides protection for goods being transported by sea, ensuring that they are covered in the event of loss during transit due to unforeseen weather conditions.
  • A legal requirement for international trade: In some cases, cargo insurance may be required by law, particularly for international trade. Compliance with these regulations can help ensure the smooth and legal shipment of goods.
  • Peace of mind for businesses: It gives the policyholder a sense of satisfaction, knowing that their goods are protected in the event of loss or damage. This allows them to focus on their business operations without worrying about the potential financial impact of shipping goods.

Key Considerations for choosing a marine cargo insurance company

1. Understand the value of your cargo

You should accurately determine the cost of your goods, as this will determine the amount of coverage you need. Additionally, make sure the marine cargo insurance company you choose offers coverage for the full value of your goods, as some policies may have limits.

2. Provides the right type of coverage for all risks during transportation

Consider the coverage options offered by the insurance company and make sure they meet your specific needs. Some common coverage options include ‘all risks’ coverage, war risk coverage, and hull coverage.

3. Reputation

Research the reputation of the marine cargo insurance company, including customer reviews and ratings, to gauge the level of customer satisfaction.

4. Years of experience in the industry

An insurance company that has been in business for a long time is often a great option. This doesn’t mean that a fairly new one won’t make the cut. A more experienced one is simply a safer option. 

5. Have a qualified insurance team

Choose an insurance company that has a deep understanding of the industry (specifically for the offshore O&G locations) and the specific risks involved in shipping goods. 

Importance of marine cargo insurance in offshore transportation

Insurance is particularly essential in offshore shipping, as it provides protection against the unique risks associated with transporting goods to and from O&G locations. 

Some of the key benefits include:

  • Protection against sea hazards: Offshore transportation can be subject to harsh weather conditions, including high winds, rough seas, and storms. Marine cargo insurance provides protection against losses or damages caused by these hazards.
  • Coverage against theft and piracy: Offshore transportation may be vulnerable to thefts, particularly in high-risk areas that are very far away from the shores. Cargo insurance can provide coverage for losses or damages caused by these events.
  • Protection against mechanical breakdown: Offshore transportation often involves the use of specialised equipment and machinery, which may be subject to mechanical breakdown or failure. Marine cargo insurance can provide coverage for losses caused by such delays.
  • Compliance with industry regulations: The offshore oil and gas industry is subject to a range of laws, including those related to the transportation and safety of products. Marine cargo insurance can help ensure compliance with these regulations, protecting against financial losses and legal consequences.
  • Protection against losses caused by delays: In the offshore oil and gas industry, timely delivery is almost as important as the delivery itself. Additionally, the products may include perishable items which may not stay good for extended days of transit. Delays, in this case, mean lost revenue overall. 


Investing in marine cargo insurance helps businesses stay compliant with industry regulations, particularly for international trade. Furthermore, a well-established and efficient claims-handling process, provides peace of mind for businesses. This, in turn, allows them to focus on their operations without worrying about the potential financial impact of shipping goods. 

In addition to good marine cargo insurance, good containers, like DNV-certified offshore reefers, offer additional safety to ensure that your products reach the destination in good condition. Reach us at MGS Offshore for buying and renting refrigerated containers for offshore shipment

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