Cargo insurance and transit risk

The incoterm decides where risk transfers, and the party holding risk at any point is the one that needs insurance for it. Under FOB the buyer carries risk from loading; under DDP the seller carries it to the destination. A buyer that assumes the seller insured, without checking, is often uninsured for the longest leg of the journey. See FOB, DDP and transit risk.

Institute cargo clauses come in broad and narrow forms. The broadest covers most physical loss and damage; narrower forms list named perils only. Delay is generally excluded, which surprises people, because in seasonal apparel delay can destroy far more value than damage. Consequential loss, including the lost season, is normally not covered at all.

Cover is usually written on invoice value plus freight plus a margin, not on the goods' retail value, so a total loss does not make a business whole.

If cargo or expense is sacrificed to save a voyage, general average makes all cargo owners contribute proportionally, whether or not their goods were harmed. Cargo can be held until security is posted. It is rare, it is expensive, and it is the reason insurance for ocean freight is not optional even for a buyer who could absorb the loss of a single container.