Damage in transit is rare enough to be forgotten when the order is placed, and expensive enough to decide the year when it happens. The subject is usually settled in one line of the quotation — a three-letter term — and everyone assumes the line means the goods are covered. It does not mean that. An Incoterm allocates obligations between seller and buyer; a policy decides what is paid and to whom. They are two different documents and they can disagree.
CIF is an obligation, not a cover
Under CIF, the seller must contract insurance for the benefit of the buyer. That is the whole of it. The rules require only a minimum level of cover — the narrow end of the market's standard clause sets, close to named perils — unless the contract says otherwise. CIP, its equivalent for other modes of transport, was aligned in the 2020 edition on a broader level of cover. So two terms that both put insurance on the seller do not buy the same thing, and a buyer who reads only the letters will not see it.
The rest follows from there. The certificate is issued by an insurer chosen by the seller, in a currency the seller chose, and a claim is handled where that insurer sits. None of this is dishonest; it is simply that the person who buys the cover is not the person who will use it. On FOB, you insure yourself, which is more work and leaves you holding the document you will actually need.
| Term | Who must insure | What the buyer should check |
|---|---|---|
| FOB, FCA | Nobody, by the term — the risk is yours once the goods are handed over | That your own policy attaches at the point where the risk transfers, not at the port of departure |
| CIF, CIP | The seller, for your benefit | Which clause set is named, the insured value, the deductible, and where a claim is settled |
| DDP | The seller, for their own benefit — the goods are theirs until delivery | What happens if the goods arrive damaged: you have a commercial claim on the seller, not an insurance claim |
The carrier's liability is not insurance
A carrier is liable for the goods it carries, but the international conventions that govern sea, road and air transport cap that liability by weight, not by value. For anything dense and cheap the cap is generous; for anything light and valuable it is derisory, and the difference between the cap and your invoice is simply lost. On top of that, a claim against a carrier means proving the damage happened in their custody, within a short time limit, against a party whose business is to contest it.
There is also a maritime rule that surprises importers the first time: when a ship suffers a casualty and the master incurs expense to save the voyage, the cost is shared between everyone whose cargo was saved. If you are insured, your insurer deals with it. If you are not, your container can be held until you provide a guarantee yourself — for an event in which your goods were never damaged.
What a policy covers, and the exclusions that come back
A cargo policy exists in two broad shapes: an all-risks form, which covers physical loss or damage except what it excludes, and a narrower form that covers only listed events. The first is worth its price for most finished goods. In both cases, the exclusions are where the argument happens, and they are remarkably consistent from one insurer to the next.
- Insufficient or unsuitable packing. The single most used exclusion. If the carton collapsed because it was never designed for a stack of that height, the loss is a packaging decision, not a transport accident.
- Inherent vice. Damage the goods caused themselves: a product that corrodes, ferments, dries out or delaminates in ordinary conditions was going to do it anyway.
- Delay, and everything that follows from it. A cargo policy pays for damage to goods. It does not pay for the season you missed, the customer penalty or the air freight you bought to catch up.
- Ordinary wear, leakage and loss of weight. The normal cost of moving something, not an event.
- Wilful acts, and goods that were never declared for what they are. A policy taken out on a description that does not match the container is a policy with a hole in it.
Two numbers on the certificate deserve a look before anything goes wrong: the insured value, which should reflect the invoice plus freight plus the customs cost of replacing the goods rather than the factory price alone, and the deductible, which decides whether a small claim is worth making at all.
The chain of proof starts at delivery, not at the claim
- Photograph the container doors and the seal before anything is opened, with the seal number readable. A seal that does not match the shipping document is its own finding.
- Write precise reserves on the delivery document at the moment of receipt — what is wet, which cartons, which positions in the load. « Under reserve of unpacking » written alone is worth nothing in most jurisdictions.
- Notify the carrier and the insurer in writing immediately, even before the extent is known. The deadlines are short and they run from delivery, not from the day you finish counting.
- Leave the goods and their packaging exactly as they arrived, in the state and the place where they were found, until a surveyor has seen them. Repairing, repacking or scrapping before the survey destroys the claim more surely than the damage did.
- Assemble the file in one place: invoice, packing list, transport document, photographs, the reserves, the survey report, and the calculation of what you are claiming.
Claims are refused for procedural reasons far more often than for the merits. A clean signature on the delivery note, goods unpacked and the cartons thrown away, a notification sent weeks later, a claim for an amount nobody can reconstruct: each one is enough on its own. The insurance was bought long before; what decides the payment is the hour after the truck arrives.
Ask for the certificate itself, not the line in the quotation. Three things on it change the answer: which clause set it names, who is the beneficiary, and in which country a claim is settled. A cover you can only enforce in a court you will never go to is not a cover.