Cargo Insurance for Manufacturers: Protecting Raw Material Imports and Finished Goods Exports

Why cargo insurance matters for manufacturers

If you manufacture products in the UK, your supply chain is only as strong as your ability to keep materials moving and deliver finished goods on time. One damaged container of components, one stolen pallet of high-value parts, or one delayed shipment that triggers contractual penalties can quickly wipe out the margin on an entire production run.

Cargo insurance (often called marine cargo insurance, even when goods travel by road or air) is designed to protect manufacturers against financial loss when goods are in transit. That includes:

• Importing raw materials, parts, and packaging

• Moving stock between sites (factory to warehouse, warehouse to distribution)

• Exporting finished goods to customers, distributors, or overseas subsidiaries

For manufacturers, cargo insurance isn’t just “nice to have”. It’s a practical risk management tool that helps stabilise cash flow, protects customer relationships, and supports growth into new markets.

What is cargo insurance (and what does it cover)?

Cargo insurance covers physical loss of or damage to goods while they are being transported. Depending on the policy and the agreed terms, it can cover goods while they are:

• At the supplier’s premises (pre-shipment storage)

• Being loaded and unloaded

• In transit by sea, air, road, rail, or courier

• Temporarily stored during transit (e.g., port storage, bonded warehouses)

• Delivered to the final destination

Cargo insurance is typically arranged on one of two bases:

• Single shipment (voyage) cover: for a specific shipment with declared values

• Annual/open cover: for manufacturers shipping regularly, with reporting and agreed rates

The right structure depends on shipment frequency, values, routes, and how predictable your shipping volumes are.

Why manufacturers have unique cargo risks

Manufacturers face cargo risks that are different from wholesalers or retailers. Common issues include:

• Production dependency: one missing component can stop a production line

• Time-sensitive delivery windows: late delivery can trigger penalties or lost contracts

• Complex packaging and handling: fragile, hazardous, temperature-sensitive, or oversized items

• High-value inputs: specialist parts, electronics, metals, chemicals, or medical-grade materials

• International exposure: customs delays, port congestion, strikes, and geopolitical disruption

Cargo insurance can’t prevent disruption, but it can reduce the financial impact and help you recover faster.

Importing raw materials: what can go wrong

When importing raw materials, manufacturers often focus on cost and lead time. But the risk profile can be significant, especially when you’re relying on a small number of suppliers.

Typical loss scenarios include:

• Water damage from container leaks, storms, or poor stowage

• Theft and pilferage at ports, depots, or during road legs

• Contamination (particularly for food-grade, pharma, or chemical inputs)

• Handling damage during loading/unloading with forklifts or cranes

• General average contributions following a major maritime incident

• Misdelivery or loss due to documentation errors

Even if the supplier is “responsible”, recovering costs can be slow and uncertain without the right insurance in place.

Exporting finished goods: protecting revenue and reputation

Exporting finished goods introduces additional exposures:

• Higher insured values (finished goods include labour, overhead, and margin)

• Customer contract requirements (some buyers require evidence of insurance)

• Product sensitivity (precision equipment, electronics, medical devices, engineered components)

• Return logistics (damaged goods may need to be returned, repaired, or destroyed)

A damaged export shipment can create a double hit: you lose the goods and you may lose the customer. Cargo insurance helps you avoid having to choose between absorbing the loss or risking the relationship.

Understanding Incoterms: who is responsible and when?

A common cause of uninsured cargo losses is confusion around Incoterms (International Commercial Terms). Incoterms define who is responsible for transport, insurance, and risk at each stage of the shipment.

Examples:

• EXW (Ex Works): buyer takes responsibility very early (often at the seller’s premises)

• FOB (Free On Board): seller is responsible until goods are loaded onto the vessel

• CIF (Cost, Insurance and Freight): seller arranges insurance and freight to the destination port

• DAP/DDP (Delivered at Place / Delivered Duty Paid): seller may carry risk much further into the journey

Key point for manufacturers: responsibility for arranging insurance is not always the same as responsibility for the goods at the moment of loss. You need your cargo policy to match your Incoterms and your real-world logistics.

“All risks” vs named perils: what’s the difference?

Cargo insurance is often arranged under internationally recognised clauses.

• All risks (commonly Institute Cargo Clauses A): broad cover for accidental loss or damage, subject to exclusions.

• Named perils (often Clauses B or C): narrower cover, typically for major events such as fire, explosion, vessel sinking, collision, and certain natural perils.

For many manufacturers, “all risks” is the practical choice because it better matches how losses occur in real life (handling damage, theft, water ingress, etc.). Named perils cover can look cheaper but may leave gaps that only become obvious after a claim.

Common exclusions and gaps manufacturers should watch

Cargo insurance is powerful, but it’s not a blank cheque. Common exclusions and problem areas include:

• Inadequate packaging: if goods weren’t packed appropriately for the journey

• Inherent vice: deterioration due to the nature of the goods (e.g., rust, spoilage) unless specifically covered

• Delay: many policies exclude pure delay losses (even if delay is caused by an insured event)

• War and strikes: often excluded unless added back via extensions

• Unattended vehicles: theft from vehicles may be restricted without security conditions

• Temperature deviation: needs specialist cover for chilled/frozen or controlled ambient goods

• Second-hand or refurbished goods: may require special terms

A good broker will help you map your real shipping process against policy conditions so you don’t discover a gap mid-claim.

General average: the cargo risk many manufacturers don’t expect

General average is a maritime principle where, if a ship’s master makes a deliberate sacrifice to save the voyage (e.g., jettisoning cargo, firefighting, emergency towing), all cargo owners may be required to contribute to the loss.

Even if your goods arrive undamaged, you could still face a general average demand before your cargo is released. Cargo insurance typically covers general average contributions and related costs, which can be essential for protecting cash flow.

Single shipment vs annual/open cover: which is best?

Single shipment cover

Best for:

• Manufacturers exporting occasionally

• One-off projects or high-value shipments

• Trial shipments into new markets

Pros:

• Simple for ad-hoc shipments

• Clear declaration of values and routes

Cons:

• Can be time-consuming to arrange repeatedly

• Risk of forgetting to insure a shipment

Annual/open cover

Best for:

• Regular import/export activity

• Predictable shipping lanes and values

• Manufacturers with multiple suppliers and customers

Pros:

• Continuous protection for shipments within agreed parameters

• Often better pricing and smoother admin

• Improves compliance with customer and lender requirements

Cons:

• Requires reporting discipline (declarations)

• Needs periodic review as volumes change

For most growing manufacturers, annual/open cover is the more resilient option.

How sums insured are calculated for manufacturers

A common mistake is insuring only the invoice value. Your exposure may be higher.

Cargo policies often insure on a basis such as:

• Cost + freight + 10% (a common approach)

• Selling price (particularly for finished goods)

• Replacement cost including manufacturing overhead

For raw materials, you may want to include:

• Purchase cost

• Freight and duties

• Handling fees

• Urgent replacement shipping costs (if covered)

For finished goods, you may want to include:

• Cost of materials

• Labour and overhead

• Packaging

• Freight

• Profit element (where appropriate)

Getting the valuation basis right is critical. Underinsurance can reduce claims payments.

Cargo insurance and supply chain resilience

Cargo insurance is one part of a wider risk strategy. Manufacturers often pair it with:

• Supplier risk assessments and dual sourcing

• Better packaging standards and transit testing

• Security protocols for high-value loads

• Contract review (Incoterms, liability caps, delivery penalties)

• Business interruption planning

If you’re bidding for larger contracts or exporting more, insurers and customers may also expect evidence of robust logistics controls.

What information insurers typically need

To quote and place cargo cover, insurers commonly ask for:

• Nature of goods (raw materials vs finished goods, hazardous, fragile, high value)

• Annual shipping turnover and maximum any one shipment

• Routes and destinations (UK, EU, worldwide)

• Modes of transport (sea/air/road/rail/courier)

• Packaging type (palletised, crated, containerised)

• Security measures (tracking, sealed trailers, approved hauliers)

• Claims history

• Incoterms used and who arranges transit

The more clearly you can describe your shipping profile, the easier it is to secure appropriate cover at a fair premium.

Claims: what manufacturers should do if something goes wrong

When a loss occurs, speed and documentation matter. Practical steps include:

1. Notify your broker/insurer immediately and follow their instructions.

2. Mitigate further loss (e.g., move goods to dry storage, separate damaged stock).

3. Document everything: photos, packing, seals, container numbers, delivery notes.

4. Keep damaged goods for inspection where possible.

5. Request surveyor attendance if required.

6. Preserve recovery rights against carriers (your insurer may pursue them).

Good cargo insurance doesn’t just pay claims. It gives you a clear process and access to surveyors and claims specialists.

Practical examples (real-world style scenarios)

• A UK manufacturer imports electronic components by sea. A container leak causes water ingress and corrosion. “All risks” cargo cover responds, subject to packaging and handling conditions.

• A manufacturer exports finished goods to a distributor. A pallet is stolen during the road leg to the port. Cargo insurance covers theft, and the manufacturer can replace stock quickly to protect the relationship.

• A shipment is caught in a vessel incident and general average is declared. The manufacturer’s insurer pays the general average contribution so the cargo can be released.

How to choose the right cargo insurance as a manufacturer

When reviewing options, focus on fit, not just price. Key questions to ask:

• Are we covered for both imports and exports (and domestic transfers if needed)?

• Is cover “warehouse to warehouse” or only port to port?

• Do we need temperature-controlled, hazardous goods, or high-value theft extensions?

• Are war and strikes included for our key routes?

• What are the security and packaging conditions?

• How are values calculated (invoice vs replacement vs selling price)?

• What is the maximum any one shipment and does it match our worst case?

A policy that looks cheaper but doesn’t match your shipping reality can become expensive the first time you need it.

FAQs: Cargo insurance for manufacturers

Do we need cargo insurance if the carrier has liability cover?

Carrier liability is often limited and may not reflect the true value of your goods. It can also be difficult to recover quickly. Cargo insurance is designed to protect your balance sheet, not the carrier.

Does cargo insurance cover delays?

Most cargo policies do not cover pure delay losses. Some related costs may be covered if they result from an insured physical loss or damage, but you should assume delay itself is excluded unless specifically added.

Are goods covered while stored at a port or depot?

Often yes, if the policy is written on a warehouse-to-warehouse basis and storage is incidental to transit. Extended storage may need to be declared.

What about goods moving between our factory and a UK warehouse?

Many cargo policies can include domestic transits, but not all do automatically. If you move stock between sites, make sure it’s included.

Can we cover high-value, theft-attractive goods?

Yes, but insurers may require additional security measures (tracking, approved hauliers, secure parking, sealed trailers) and may apply higher excesses.

Do we need separate cover for air freight vs sea freight?

Not necessarily. Many policies cover multiple modes of transport, but you must disclose your shipping methods and ensure the policy wording includes them.

How do we insure exports sold on different Incoterms?

You can structure cover to apply when you are at risk (e.g., EXW purchases, DDP sales). The key is mapping your Incoterms to the point where risk transfers.

Next step: get the right cargo cover in place

If you’re importing raw materials and exporting finished goods, cargo insurance can be one of the simplest ways to protect your cash flow and keep production moving.

If you want a quote, you’ll typically need your annual shipping values, maximum shipment value, main routes, and the type of goods you ship. From there, a broker can recommend either single shipment cover or an annual/open policy that matches your manufacturing operation.

Call Insure24 on 0330 127 2333 or request a quote online to discuss cargo insurance tailored to your supply chain.