Air Cargo Insurance

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Daniel Liberto
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Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

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Updated July 26, 2021
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David Kindness
David Kindness
Reviewed by David Kindness
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David Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes.
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Skylar Clarine
Skylar Clarine
Fact checked by Skylar Clarine
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Air Cargo Insurance

Investopedia / Theresa Chiechi

What Is Air Cargo Insurance?

Air cargo insurance is a type of policy that protects a buyer or seller of goods that are being transported through the air. It reimburses the insured for items that are damaged, destroyed, or lost and, in some cases, may even offer compensation for shipment delays.

A close cousin of air cargo insurance is marine cargo insurance, which protects goods that are transported over water.

Key Takeaways

  • Air cargo insurance protects a buyer or seller of goods being transported through the air from damage, loss, and, in some cases, even shipment delays.
  • Most air freight companies provide a minimum amount of insurance for all freight, known as carrier liability, although such coverage is typically scant.
  • Consequently, many big shipping companies seek out additional protection, offered by insurance companies, freight forwarders, and trade-service intermediaries.
  • Air cargo insurance premiums vary based on the level of coverage, value, and nature of the insured items; where they are being transported; and the route they take.
  • Most air cargo insurance policies offer partial coverage, which may only reimburse 60% of the inventory value, but there are more comprehensive packages available.

Understanding Air Cargo Insurance

Air transport has emerged as one of the quickest, safest, and most economical ways to ship goods around the world. Most air freight companies provide a minimum amount of insurance for all freight, known as carrier liability. This coverage is typically scant, however. It often consists of many exclusions, including floods, earthquakes, and natural disasters, and generally doesn't provide compensation for high-value and delicate goods.

These limitations have led many big shipping companies to seek out additional insurance to shield themselves against breakage, theft, lost merchandise, and, in some cases, the cargo not arriving in time, resulting in a consequential loss. Some insurance companies offer air cargo insurance directly, as do several freight forwarders and trade-service intermediaries.

The amount of coverage and the deductible—the money a policyholder pays for expenses before the insurance plan starts to pay out—required for air cargo insurance varies based on the goods, as well as the individual provider. Payments, known in the insurance industry as premiums, also differ and are typically calculated based on the value of the insured items, whether they are hazardous, where they are being transported, and the route that they'll take to their destination.

While individuals sometimes buy air cargo insurance, far more often companies buy it to ship their inventory to customers and distributors, both in the U.S. and around the world. Some large companies, in fact, may have one or more employees that deal solely with air cargo and other freight insurance claims.

Types of Air Cargo Insurance

Most forms of air cargo insurance involve various types of partial coverage, which may only reimburse 60% of the inventory value. In addition, many types of partial coverages might exclude damages caused by improper packing, infestations, weather, or delivery rejection by the customer.

There are more comprehensive policies out there, though, that offer greater peace of mind. For instance, full-risk air cargo insurance typically protects against almost all types of damage or loss. Such coverage, understandably, is more expensive. It is also fairly rare and may exclude older goods or ones vulnerable to breakage, spoilage, or loss. It also may not pay out on claims arising from war, civil arrest, customs rejections, or natural disasters.

Important

Air cargo insurance prices vary considerably and largely depend on the extent of coverage, the provider, the value of the insured items, and how delicate they are, as well as the destination and the route they take to get there.

Some insurers offer contingent liability policies, too. This type of insurance might be preferable when a sales contract requires a buyer to accept goods on delivery, regardless of whether those items were damaged during transit.

There are also types of air cargo insurance that provide coverage during their entire mode of transit, which may also include ground shipping after the merchandise reaches its intended airport.