Shipping Chinese Products to U.S. | How Cargo Insurance from China works

“The freight forwarder said they had insurance, but it only covered a fraction of the loss.” That is one of the most common things importers tell us after a claim.

Others describe getting screwed on a container because the insurance had exclusions buried in the fine print. Others had to absorb the entire loss because the forwarder’s coverage was simply not enough.

If you are importing goods from China for your Amazon store or ecommerce business and you are relying entirely on your freight forwarder’s insurance, this article is exactly what you need to read before your next shipment leaves port.

Are you importing goods from China or other foreign locations for your Amazon Store or other e-commerce store? Not sure if you need to insure your goods when they’re shipped via air or ocean freight? Is it cheaper to buy coverage through your freight forwarder or on your own? Curious as to what it costs to buy ocean cargo insurance?

In this article, I’m going to talk about how, why, and how much it costs to get insurance on the goods you’re shipping from China, or other foreign locations to the United States.

So, let’s start with why you should get shipping insurance on your goods once they leave the factory in China.

Why Do You Need Cargo Insurance from China?

Cargo insurance from China protects you against a risk most importers do not discover until it is too late. You already paid the manufacturer in full before the voyage began. The moment your goods leave the factory, every dollar of loss belongs to you. No carrier, forwarder, or shipping line is legally obligated to make you whole unless you have your own policy in place.

A single total loss on a $100,000 container shipment erases approximately 22 years of annual standalone cargo policy premiums. That is the cost-of-inaction calculation that most importers never run until they are staring at a denied claim.

The main reason is that regardless of how they are shipped, there are often claims resulting from damages or theft that do occur. Now, if you’re a small business shipping small parcel shipments via FedEx, DHL, or UPS, then you probably don’t need insurance because the values are pretty low per shipment and you could likely absorb a claim out of pocket.

But if you’re shipping hundreds of thousands or more in value via containers then having insurance makes sense. You don’t want to pay out of pocket for a large claim if goods arrive damaged, wet, or lost at sea.

You may be thinking, lost at sea? Damaged goods shipped in a steel container, and that’s nonsense.

Unfortunately, it’s not. Containers do go overboard and in some instances are thrown overboard by the ship’s captain to save a voyage at risk of sinking. In addition, there have been notable cargo ships lost entirely at sea over the past few years where thousands of containers go down with the ship.

Even if your container doesn’t go overboard we have settled dozens of claims relative to water-damaged goods, theft of goods, and broken and damaged goods from inside the container.

Remember, you’ve paid for those goods in full to the manufacturer before the voyage began so any loss that happens is on you and if the container is lost, that’s a total loss out of your pocket.

In addition, there is something called General Average which is a shipping term used and accepted internationally. This basically says that if one or more “interests” or owners of goods onboard a ship suffer a claim because the captain of the vessel casts containers overboard to save the voyage, known as a voluntary sacrifice, then all the other interests or owners of goods aboard that vessel will proportionally share in that loss.

This is a risk you have even if your goods make it to your warehouse undamaged. If you rely on your freight forwarder’s coverage, you’ll be surprised that it does not include coverage for General Average.

Like a lot of business insurance issues, you’ve got to ask yourself, is it better to trade a few dollars today in premium for transferring the big risk of losing a huge amount of money if your goods are lost, damaged, or destroyed? It only takes one claim to erase dozens of years of premiums to make it worth it. And we’ll focus on that in a minute.

How do you get ocean cargo insurance?

Getting cargo insurance from China is more straightforward than most importers expect, and the gap between what a forwarder’s policy covers versus what your own policy covers is larger than almost anyone realizes until a claim is denied. There are two predominant ways. The difference in terms, scope, and payout can be the difference between recovering your full loss and absorbing it.

There are two predominant ways of getting ocean cargo insurance

So, let’s look at the differences.

Freight Forwarder Coverage vs. Your Own Cargo Insurance from China

What does ocean cargo insurance cost?

Cargo insurance from China costs less than most importers expect, and the annual economics of your own policy versus per-voyage forwarder pricing shift decisively in your favor once you are shipping more than a few containers per year. The example below shows exactly how the numbers compare on the same shipping volume.

When you purchase insurance from a shipping line, you’ll pay about .5% on the value of those goods. As an example, if you shipped $100,000 worth of goods, your CIF premium would be $500 on that voyage. If you had 10 voyages per year, you’d end up paying about $5,000 for the year in shipping insurance costs.

If you had the same $100,000 worth of goods crossing the ocean ten times in a year and you had your own ocean cargo insurance policy you would likely pay an annual premium of about $4,500. That is slightly less, but for much better protection which can be customized to fit you and not the shipper.

Annual Cost Comparison: Forwarder Rate vs. Own Policy

Estimates based on standard all-risk marine cargo rates. Actual premiums vary by commodity type, declared value, vessel routing, and coverage terms.

Here’s the bottom line

I always tell my clients that they should be in control of their insurance and not leave it up to another party, where they put themselves at risk of getting inferior coverage terms and possibly overpaying.

Now, I will give you an exception. If you only do a few shipments a year or you’re just starting out and don’t know what your shipping exposures are going to look like, then buying coverage through the forwarder or shipping line may be a good option. Then, when you get higher volumes, I’d suggest buying your shipping insurance policy.

When it comes to business insurance doing it the easy way may not necessarily be the best way. The last thing you want to do is jeopardize your cash flow and business by making a mistake here. It pays to work with an expert who’s been through this dozens and dozens of times to help you make more informed decisions about protecting your goods on the water, in the air, or once they’ve landed in your warehouse.

In addition, we insure a lot of companies importing goods from China for product liability, product recall coverage, and more. If you’re looking for an insurance broker to talk to about your situation, I’d love to hear from you.

I promise you one thing if we do connect. No high-pressure sales nonsense, just a conversation to see if we’re a good fit for you and your business insurance needs.

Thanks!

What to Look for in a Cargo Insurance Broker for China Imports

Not every commercial insurance broker has handled cargo insurance from China before. This is a specialized area within the broader insurance by coverage landscape. The wrong broker can leave you with a policy that sounds complete but fails the moment a claim is filed. Here is what separates a qualified cargo broker from a generalist.

Frequently Asked Questions About Cargo Insurance from China