Many shippers assume that if a carrier loses or damages their goods, the carrier pays for them. In most cases the carrier pays something — but that amount is set by international convention, calculated on weight rather than value, and frequently a fraction of what was lost.
The difference between what the carrier must pay and what the goods are worth is the gap cargo insurance exists to fill.
How carrier liability is limited
International carriage is governed by conventions that cap how much a carrier is liable for. The caps are expressed in Special Drawing Rights (SDR), a unit of account defined by the International Monetary Fund whose value moves with a basket of currencies.
- International air — under the Montreal Convention, carrier liability for cargo is limited to 26 SDR per kilogram. This figure rose from 22 SDR with effect from 28 December 2024, following one of the convention's periodic five-yearly reviews.
- International sea — commonly governed by the Hague-Visby Rules, which limit liability to the higher of a per-package or a per-kilogram amount.
What that means in practice
Consider a 2-kilogram air shipment of high-value electronics. Under the Montreal Convention, the carrier's maximum liability for its loss is 2 × 26 = 52 SDR — whatever the electronics were worth. A 300-kilogram shipment of low-value textiles, on the other hand, would carry a cap of 7,800 SDR, which may exceed its value entirely.
The carrier is also only liable when it is actually at fault and no exemption applies. Losses caused by inherent defects in the goods, insufficient packing, acts of war or the actions of public authorities are typically excluded.
Two ways to close the gap
| Declared value for carriage | Cargo insurance | |
|---|---|---|
| What it is | Raising the carrier's liability limit by declaring a higher value | A separate policy covering the goods themselves |
| Does it need proof of carrier fault? | Yes | Generally no, for covered risks |
| Typical cost | A supplementary charge on the waybill | A premium, usually a percentage of insured value |
| Claims handled by | The carrier | The insurer |
For most commercial shipments of meaningful value, all-risks cargo insurance gives broader and more predictable protection, because a claim does not depend on proving the carrier was at fault.
If something goes wrong
- Inspect on delivery. Note visible damage or shortage on the delivery receipt before signing. A clean signature makes later claims much harder.
- Photograph everything — the outer packaging, the inner packing and the damaged goods — before moving or discarding anything.
- Keep the packaging. Insurers and carriers often want to inspect it.
- Notify promptly in writing. Conventions and policies set strict time limits for written notice of damage, and they can be short.
- Gather the documents — commercial invoice, packing list, waybill or bill of lading, photographs, and a repair estimate or proof of value.
The single most important habit is to decide on cover before the goods ship. Insurance cannot be arranged after a loss, and the carrier's limit applies automatically to anything that travels without it.