Shipping insurance (often called cargo insurance) pays you for physical loss of or damage to your goods while they are in transit by road, rail, ocean or air. It matters because carriers’ legal liability is limited by law, usually to a small amount per kilogram or per package, which rarely comes close to what your goods are worth. Whether you are shipping household goods, a vehicle or commercial freight from Canada, shipping insurance is what lets you recover the full value if something goes wrong.

Shipping is safe, but things do go wrong

Most shipments arrive in good condition. But an international move involves long distances, several carriers and many handoffs between trucks, warehouses, terminals, ships and planes, and every handoff adds risk. The most common problems are:

• Damage in transit from rough seas, mishandling, poor stowage or road accidents
• Theft or pilferage, especially at ports and during handling
• Water damage from condensation, leaks or seawater
• Total loss, rarely, through fire, a vessel casualty, containers lost overboard or misrouting

Before you decide whether to insure, ask yourself what a loss would mean to you. Could you afford to replace your furniture, your car or a batch of goods you’d planned to sell? If your answer is no, or you simply want to know you’ll get the value back, insurance is the practical choice.

Why the carrier’s liability isn’t enough

Many people assume that if a carrier damages their goods, the carrier pays the full value. In fact, carrier liability is capped by law and contract, and the cap is usually based on weight or number of packages, not on value:

• Road freight within Canada: under the standard bill of lading conditions used in most provinces, a carrier’s liability is limited to $4.41 per kilogram ($2.00 per pound) unless a higher value is declared and paid for. A 20-pound piece of artwork worth $10,000 could be worth only $40 in a claim.
• Ocean freight: under the Hague-Visby Rules, which Canada applies through the Marine Liability Act, liability is generally limited to 666.67 Special Drawing Rights (SDR) per package or 2 SDR per kilogram, whichever is higher. A whole container of household goods may count as only a few packages.
• Air freight: under the Montreal Convention, the limit is 26 SDR per kilogram for shipments carried on or after December 28, 2024.

An SDR is an international reserve unit whose value changes daily (roughly $1.80 to $1.90 Canadian in recent years). Carriers can also avoid liability altogether for events such as storms, fires or errors in navigating the ship. That is why we always recommend full-value, door-to-door shipping insurance for shipments by air, ocean or road.

What shipping insurance covers

There are several types of cargo policy. Most are based on standard wordings used throughout the marine insurance market, known as the Institute Cargo Clauses:

• All-risk coverage (Clauses A): the broadest form of shipping insurance. It covers physical loss or damage from any external cause unless the policy specifically excludes it, including fire, storms, water damage, accidents, rough handling, theft and goods washed overboard.
• Named-perils coverage (Clauses B and C): covers only the events listed in the policy. Clauses C is the narrowest, covering major events such as fire, the vessel sinking, stranding or colliding, a truck or train overturning or derailing, jettison and general average. Clauses B adds perils such as earthquake, washing overboard and seawater entering the container. Neither covers theft or ordinary handling damage.
• Total-loss-only coverage: pays only if the entire shipment is lost. It’s cheaper but leaves partial damage uncovered.
• Personal effects coverage: designed for household goods. Insurers often require goods to be professionally packed, a detailed inventory with values, and approval in advance for high-value items such as artwork, jewellery or collectibles.
• Specialized cargo policies: for goods with particular risks, such as refrigerated or temperature-controlled cargo.

General average: a risk many shippers don’t know about

If a ship has an emergency, such as a fire or engine failure, and costs are incurred to save the vessel and cargo, maritime law can require every cargo owner on board to share those costs in proportion to the value of their goods. This is called general average. Even if your container is undamaged, it can be held until you pay your share or provide a guarantee. Shipping insurance normally covers general average contributions, and the insurer usually provides the guarantee for you.

What shipping insurance doesn’t cover

Read your policy’s exclusions. Common ones include:

• Delays: insurance pays for loss or damage, not for the inconvenience or cost of a shipment held up in customs or at a port
• Improper or insufficient packing, especially if you packed the goods yourself
• Inherent vice, meaning damage caused by the nature of the goods themselves, such as spoilage, rust or mechanical breakdown
• Ordinary wear and tear, and damage that existed before shipping
• War and strikes, unless added to the policy
• Fragile or high-value items that weren’t declared or approved in advance

Coverage always depends on the nature of the goods and the insurer’s approval, so talk to us before you ship to confirm what is available for your shipment.

How much should you insure for?

Insure for the full replacement value, not just what you paid. For commercial cargo, the standard is 110% of the CIF value: the cost of the goods plus insurance plus freight, plus 10% to cover extra costs if you have to replace them. For personal effects, use what it would cost to replace each item at destination.

If you are buying or selling goods internationally, check the Incoterms in your contract. Under CIF and CIP terms, for example, the seller must arrange insurance, but CIF only requires minimum (Clauses C) coverage, so the buyer may want to arrange broader cover.

How to reduce risk when shipping internationally

• Work with an experienced shipping company with established procedures and reliable partners at destination.
• Pack properly, using strong boxes, crates and padding. Professional packing reduces damage and is often a condition of coverage for personal effects shipping.
• Secure vehicles and heavy items by blocking and bracing them in the container so they can’t shift. See our vehicle shipping services.
• Label and document carefully, with accurate descriptions and values, to avoid misrouting and customs delays.
• Photograph valuable items before they’re packed and keep receipts or appraisals.
• Inspect on delivery, note any damage on the delivery receipt, take photos, keep the packaging and report the claim promptly, since policies and carriers have strict notice deadlines.

Frequently asked questions

Is shipping insurance required?

Generally, no. It’s optional, but without it you carry the risk yourself and can only recover the carrier’s limited liability.

Does shipping insurance cover delays?

No. Shipping insurance covers physical loss or damage to your goods. It doesn’t pay for the cost or inconvenience of a delay.

Can I insure goods I packed myself?

Often, but cover may be narrower, for example excluding breakage. Many insurers require personal effects to be professionally packed for full coverage.

Is my car covered by my auto insurance while it’s being shipped?

Not necessarily, especially overseas. Check with your auto insurer, and consider transit insurance for the car’s full value.

We can arrange shipping insurance with your shipment through a third-party insurer and help you choose the right coverage and value. Request a quote and ask about insurance options for your goods.