Air Freight Insurance: How to Protect High Value Cargo

High value cargo moves through multiple hands and multiple facilities between origin and destination. Aircraft belly holds, ULD terminals, bonded storage, customs inspection… every handover adds risk. Insurance is how you manage that risk with a known, fixed cost instead of gambling with the value of the goods.

Why insurance matters for air cargo

The common misunderstanding is that air carriers automatically cover your full loss if something happens.

They don’t.

Airlines operate on limited legal liability. Under the Montreal Convention, liability per kilogram is capped. For expensive cargo (electronics, specialised equipment, medical instruments, minerals, or finished goods), that legal cap is far below the cargo’s real value.

One incident without insurance can wipe out a quarter of margin for a quarter.

What insurance normally covers

• loss

• theft

• damage during loading or unloading

• damage during flight

• misdelivery and non-delivery

• catastrophic incidents (fire, accident, diversion)

Coverage applies door-to-door when written correctly, not only airport-to-airport.

What insurance may exclude

• poor packaging

• inherent vice (goods that spoil or corrode on their own)

• undeclared dangerous goods

• known defective items

• loss caused by the shipper’s negligence

These are standard exclusions. Check the policy wording, not assumptions.

Who arranges the insurance?

There are three common paths:

1. you arrange a cargo insurance policy via your broker

2. your forwarder arranges an ad-hoc cargo insurance certificate per shipment

3. high volume shippers negotiate an annual blanket policy

Annual cover is more cost-efficient when shipping regularly.

How to calculate insured value

Typical formula used in trade:

Cargo value + freight cost + 10% uplift margin

The uplift margin exists because if something goes wrong, there will be extra costs: re-manufacture, re-shipment, lost time.

How to reduce claims friction

• pack to ISTA or equivalent packaging standards

• document every handover with signed receipts

• declare DG properly

• label high value items accurately

• photograph cargo condition before handover

Carriers and underwriters both respect documentation.

Final line

Air freight is fast and reliable, but not risk-free. Insurance is simply the conversion of unknown financial risk into a known cost item. If you are shipping anything that can materially damage your bottom line if lost or damaged, insure it.