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Air Cargo Insurance: Definition, Coverage, and Examples

Last updated 05/28/2024 by

Silas Bamigbola

Edited by

Fact checked by

Air cargo insurance is a vital protection for goods transported by air, shielding against damage, loss, and delays. While carriers offer basic coverage, it’s often insufficient for many shippers. This article explores the intricacies of air cargo insurance, its types, coverage, and considerations for shippers.
Air cargo insurance plays a crucial role in safeguarding goods during air transportation, offering protection against various risks such as damage, loss, and delays. In this comprehensive guide, we delve into the nuances of air cargo insurance, shedding light on its definition, types, coverage, and essential considerations for both shippers and carriers.

Understanding air cargo insurance

Air transport has become a cornerstone of global trade, facilitating the swift movement of goods across vast distances. However, this mode of transportation comes with inherent risks, including damage, theft, and logistical challenges. While air freight companies typically provide a basic level of insurance known as carrier liability, this coverage may prove insufficient for many shippers. Carrier liability often comes with limitations and exclusions, leaving valuable cargo vulnerable to various perils.
As a result, many businesses opt to secure additional protection through air cargo insurance policies offered by insurance companies, freight forwarders, and trade-service intermediaries. These policies provide enhanced coverage tailored to the specific needs of shippers, offering financial reimbursement for losses incurred during transit.

Types of air cargo insurance

Air cargo insurance comes in various forms, each offering distinct levels of coverage and risk protection. Some common types include:
Full-risk air cargo insurance: This comprehensive coverage protects against a wide range of risks, including damage, loss, and delays. While more expensive, it offers peace of mind for shippers handling valuable or delicate cargo.
Contingent liability policies: Ideal for situations where sales contracts require the acceptance of goods upon delivery, regardless of transit-related damages. These policies provide coverage that aligns with contractual obligations, mitigating financial risks for shippers.
Institute Cargo Clauses: These clauses define the scope of coverage provided by air cargo insurance policies. Type A offers all-risk insurance, Type B provides average insurance, and Type C covers total losses, also known as free of particular average insurance.

Factors influencing air cargo insurance premiums

Several factors influence the premiums associated with air cargo insurance, including:
Value and nature of the insured items: High-value or delicate goods may incur higher premiums due to their increased risk exposure.
Transportation route and destination: The geographical location and route taken by the cargo impact the likelihood of risks such as theft, damage, or delays, affecting insurance premiums accordingly.
Extent of coverage: Policies offering comprehensive coverage command higher premiums compared to those providing limited protection.
Mode of transit:Insurance coverage may extend beyond air transportation to include ground shipping, impacting premium rates.

Key considerations for shippers

When navigating the complexities of air cargo insurance, shippers should consider the following key factors:
Coverage adequacy: Assess whether the existing carrier liability coverage meets the specific needs of the shipment or if additional insurance is necessary to mitigate risks effectively.
Policy exclusions and limitations: Thoroughly review the terms and conditions of air cargo insurance policies to understand any exclusions or limitations that may affect coverage.
Claims process: Familiarize yourself with the procedures for filing claims and resolving disputes in the event of loss or damage to insured cargo.
Risk management strategies: Implement proactive measures to minimize risks during transit, such as robust packaging protocols and comprehensive inventory management systems.

Examples of air cargo insurance claims

Air cargo insurance plays a pivotal role in mitigating financial losses for businesses involved in air transportation. Below are a few illustrative examples highlighting the importance of air cargo insurance and the types of incidents it covers:

Damage during transit

A company based in New York exports electronic goods to various international markets via air freight. During transit, a portion of the cargo sustains significant damage due to mishandling by ground personnel. Without adequate air cargo insurance, the company would face substantial financial losses, including the cost of replacing damaged goods and potential delays in fulfilling customer orders.

Theft of high-value goods

A jewelry retailer ships a consignment of valuable gemstones to a client overseas using air cargo services. During transit, the shipment is stolen from a warehouse, resulting in a substantial financial setback for the retailer. Fortunately, the retailer had secured comprehensive air cargo insurance, which covers losses due to theft and provides reimbursement for the stolen merchandise.

Delayed delivery and consequential loss

An automotive manufacturer relies on timely delivery of critical components sourced from international suppliers to maintain production schedules. However, adverse weather conditions disrupt air travel, causing delays in cargo shipments and halting production lines. With appropriate air cargo insurance, the manufacturer can recoup financial losses incurred due to delayed deliveries and mitigate the impact of consequential losses on their operations.


In conclusion, air cargo insurance serves as a vital safeguard for businesses involved in air transportation, offering protection against a myriad of risks that could jeopardize the integrity and profitability of shipments. By understanding the intricacies of air cargo insurance, shippers can make informed decisions to mitigate risks effectively and ensure the seamless movement of goods across the global supply chain.

Frequently asked questions

What does air cargo insurance typically cover?

Air cargo insurance typically covers damage, loss, theft, and delays during air transportation. It may also provide coverage for issues such as customs-related problems and damage during loading and unloading.

Is air cargo insurance mandatory for all shipments?

Air cargo insurance is not mandatory for all shipments, but it is highly recommended, especially for high-value or delicate goods. Many businesses opt to purchase air cargo insurance to mitigate the financial risks associated with transit-related incidents.

How do I determine the insured value of my shipment?

The insured value of a shipment is typically calculated by adding the invoice value of the goods to the cost of freight, with an additional percentage for any additional costs. However, the exact method of determining valuation should be specified in your insurance policy.

Are there any exclusions or limitations to air cargo insurance coverage?

Yes, air cargo insurance policies often come with exclusions and limitations that may affect coverage. Common exclusions include damages caused by improper packing, infestations, weather-related events, and civil disturbances. It’s essential to carefully review the terms and conditions of your policy to understand any limitations.

Can I purchase air cargo insurance for a single shipment?

Yes, many insurance providers offer single shipment policies that provide coverage for specific air cargo shipments. These policies allow businesses to obtain insurance for individual shipments without committing to a long-term contract.

How do I file a claim for air cargo insurance?

In the event of loss or damage to insured cargo, you can typically file a claim with your insurance provider by submitting documentation such as the shipping invoice, proof of loss, and any relevant supporting documents. The claims process may vary depending on the insurance provider, so it’s essential to familiarize yourself with the specific procedures outlined in your policy.

Is air cargo insurance the same as carrier liability?

No, air cargo insurance and carrier liability are not the same. Carrier liability refers to the minimum level of insurance that air carriers are required to have, but it often provides limited coverage and may not adequately protect shippers against all risks. Air cargo insurance, on the other hand, offers enhanced coverage tailored to the specific needs of shippers, providing financial reimbursement for a broader range of risks.

Key takeaways

  • Air cargo insurance provides crucial protection against damage, loss, and delays during air transportation.
  • Various types of air cargo insurance policies offer different levels of coverage, catering to the diverse needs of shippers.
  • Factors such as the value of insured items, transportation route, and extent of coverage influence air cargo insurance premiums.
  • Shippers should carefully review policy terms, assess coverage adequacy, and implement risk management strategies to safeguard their cargo effectively.

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