Cargo Insurance for Knitwear: Cover, Exclusions and Claims
Quick answer
Carrier liability is not insurance. An ocean carrier's liability is limited by international convention to a small sum per package and excludes a long list of causes, so it will not come close to covering a lost container of sweaters. Buy marine cargo insurance on Institute Cargo Clauses (A) — "all risks" — at invoice value plus 10%, and check who is obliged to arrange it: under FOB and EXW that is you, under CIF and CIP the seller arranges minimum cover. Then make sure the documents exist to prove a claim when something goes wrong.
Most buyers discover cargo insurance at the worst possible moment: a container arrives wet, or does not arrive, and the freight forwarder says the carrier's liability is limited. It is a dry subject and it is worth twenty minutes, because it is the difference between a bad week and writing off a season's order. We see both outcomes, and the gap between them is almost always preparation rather than luck.
What carrier liability actually covers — and why it is not enough
When a carrier damages or loses your goods, they are liable — but that liability is capped by the international rules the carriage is subject to, typically Hague-Visby or a national equivalent. The cap is calculated per package or per kilogram, and it is a small fraction of what a carton of finished knitwear is worth. A container of 400 wool sweaters worth USD 6,000 can attract a liability limit in the low hundreds of dollars depending on how the packages are declared on the bill of lading.
On top of the cap, carriers are exempt from liability for a familiar list of causes: perils of the sea, act of God, acts of war, strikes, inherent vice of the goods, insufficient packing, and saving or attempting to save life or property at sea. Notice how many of those are exactly the things that go wrong with a garment shipment.
Our notes on Incoterms for knitwear shipping set out where risk transfers; cargo insurance is the separate question of whether the loss is recoverable once it has transferred to you.
The three levels of cover
Marine cargo policies are written on the Institute Cargo Clauses, and the letter matters:
- Clauses (A) — the "all risks" option. Covers all loss or damage except the specifically excluded list. For apparel this is the one to buy. Typical premium runs around 0.3–0.6% of insured value for a standard sea route, higher for high-value or theft-prone cargo.
- Clauses (B) — named perils only: fire, explosion, vessel grounding or sinking, overturning of land transport, entry of sea or lake water into the container, and total loss of a package dropped during loading or discharge. Notably it excludes theft, pilferage and non-delivery of a whole package.
- Clauses (C) — a narrower list still: fire, explosion, grounding, sinking, overturning, collision. No water ingress from above deck damage, no theft, no handling damage.
The gap that catches people: a container that is dropped and cracked, letting rain in, is covered under (B) and (C) only if the vessel was in peril. Simple handling damage and pilferage — the two most common real-world losses for bagged apparel — need (A).
What is excluded even under "all risks"
Clauses (A) still has exclusions, and knitwear runs into three of them regularly:
- Insufficient or unsuitable packing. If cartons are too weak for the stacking height, or goods were packed wet, cover can be denied. This is why carton specification and packing records matter — see packaging compliance.
- Inherent vice. Damage arising from the nature of the goods themselves. Mould is the classic dispute: is it a transit peril, or did it come from the goods being packed damp? Our piece on mould and mildew in knitwear shipments covers how that argument usually gets resolved.
- Delay. Loss caused purely by late arrival — missed selling season, markdowns — is excluded even if the delay itself was caused by an insured peril. Market-loss cover exists but has to be arranged specifically.
Also worth knowing: war and strikes are excluded from (A) and have to be added back with the separate war and strikes clauses. Most policies include them for a small additional premium, but check rather than assume.
Who arranges it — and the CIF trap
The answer is set by the Incoterm, and there is a trap in the middle:
- EXW / FCA / FOB — the buyer arranges and pays for insurance. Risk transfers early, so your policy should attach from the point the goods leave the factory, not from the port.
- CIF / CIP — the seller arranges insurance, but only to a minimum level: typically Clauses (C), at 110% of the invoice value, and only for the sea leg. That is legal, standard, and not adequate for finished apparel. If you buy CIF, ask which clauses and upgrade to (A) — the cost of upgrading is small and it is usually cheaper than arranging your own separate policy.
- DAP / DDP — the seller carries risk to destination and generally insures accordingly, but the cover is theirs, not yours. Ask what it is.
Whichever applies, confirm the attachment point. A policy that starts at load port leaves an uninsured gap between the factory and the terminal, which is real exposure in South China where cartons travel by truck and sometimes by barge before loading.
Setting the insured value
Standard practice is invoice value plus 10% — the 10% standing in for anticipated profit. You can insure higher (adding freight, duty and an uplift), and if your margin on the season is large it is worth doing, because a total loss settled at invoice value does not replace the sale you were going to make. Declare honestly: under-declaring leads to proportional reduction of any claim, which is a nasty surprise at exactly the wrong moment.
For high-value fibre — cashmere, yak, fine merino — tell the insurer what the cargo actually is. Premium is driven by value and theft risk, and a shipment of cashmere is a different risk profile from acrylic.
How a claim actually gets paid
Insurers do not pay on the strength of a sad email. A claim that moves quickly has all of this:
- Immediate written notice to the insurer or broker when loss is discovered, and to the carrier if the goods are still in their custody. Policies require prompt notice; silence is the most common reason a valid claim is weakened.
- An exception noted on the delivery document. If cartons arrive crushed or the seal is broken, write it on the delivery receipt before signing and get it countersigned. A clean signature is treated as clean receipt — this single act decides more claims than anything else in this list.
- Photographs of the outside of the container, the seal, the damaged cartons in place, and the damaged goods. Before anything is moved.
- A survey. For anything above a modest threshold the insurer appoints a surveyor. Cooperate and keep the damaged goods available until they have seen them.
- The document set — commercial invoice, packing list, bill of lading, insurance certificate or policy, survey report, correspondence with the carrier, and a completed claim form. Our shipping documents guide lists the full set and what each is for.
- Mitigation. You are expected to limit the loss: separate sound goods from damaged ones, dry or re-pack what can be saved. Keep receipts for the cost — reasonable mitigation costs are usually recoverable.
Time limits are real. Notice provisions in the policy are short, and the right to bring a claim is generally barred after a set period from discharge. Do not let a claim drift while you negotiate with the factory about who is to blame — notify first, allocate blame later.
Annual policy versus per-shipment cover
If you import regularly, an open / annual policy is cheaper per shipment and, more importantly, means cover is automatic rather than something you remember to arrange. Declare shipments monthly to the insurer. If you import once or twice a year, per-shipment cover through your forwarder is fine — just instruct them in writing, with the clauses you want, before the vessel sails rather than after.
What we do on our side
At YZR Sweaters we work with certified partner factories (BSCI, SEDEX, Oeko-Tex) across Dongguan, and we treat the shipment record as part of the deliverable: cartons are counted and photographed before stuffing, the container number and seal number are recorded and sent with the shipping documents, packing lists match the carton markings exactly, and we support the survey with production and packing records if a claim is pursued. We do not sell insurance and we do not profit from it — but the paperwork that makes a claim payable mostly originates at packing, and that is where we can help. Tell us your Incoterm and route when you order and we will make sure the documentation lines up with whoever is insuring the cargo.
Shipping on FOB and not sure where your cover starts? Send us the route, Incoterm and order value, and we'll tell you which documents you need from us to support a claim.
Get a free quote Browse our knitwear rangeFrequently asked questions
Do I need cargo insurance if the carrier is liable for my goods?
Yes. Carrier liability is capped by international convention at a small amount per package or per kilogram and excludes a long list of causes, including handling damage, theft and inherent vice. In practice a serious loss recovers a fraction of the cargo's value, which is why marine cargo insurance on Clauses (A) exists as a separate policy.
Under CIF terms, am I covered?
Only to a minimum standard. The seller must arrange insurance, but the usual obligation is the narrowest cover — typically Institute Cargo Clauses (C) at 110% of invoice value — which excludes theft, pilferage and most handling damage. Ask which clauses are being used and pay to upgrade to Clauses (A); it is a small addition and far cheaper than a separate policy.
What is the 10% uplift on insured value for?
It represents anticipated profit, so that a total-loss settlement reflects what the sale would have earned rather than only what the goods cost. You can insure above invoice plus 10% — adding freight, duty and a larger margin uplift — which is worth doing on high-margin or high-value fibre orders. Under-declaring the value results in claims being reduced proportionally.
How long do I have to make a claim?
Notice requirements in cargo policies are short — prompt written notice on discovery of loss is the standard condition — and the right to bring a claim is barred after a set period from discharge. Notify the insurer and carrier immediately, lodge a survey, and do not wait until responsibility has been agreed with the supplier before starting the process.