Types of Freight Insurance in Europe: Simple Guide

Types of Freight Insurance: A Simple Guide for Shippers, Carriers and Forwarders

Road freight in Europe usually involves these four main types of insurance. Motor liability covers the vehicle's third-party risk, CMR liability insurance covers the carrier's responsibility for your goods, cargo insurance covers the goods themselves, and forwarder's liability insurance covers the forwarder's responsibility. They protect different people against different risks, so one doesn't replace another.

Not sure which one you need? Start with the table below, then jump to the type that matters to you.

Types of Freight Insurance at a Glance

Quick Guide: Who Needs What?

• Carriers: Motor liability (compulsory), CMR liability insurance, and optionally cover for damage to your own vehicle.
• Shippers and cargo owners: Check the carrier's CMR cover, and consider cargo insurance for high-value or fragile goods.
• Freight forwarders: Forwarder's liability insurance, and check your carriers' cover.

1. Motor Liability Insurance (Vehicle Third-Party Cover)

• What it covers: Civil liability for damage or injury caused to other people by using the vehicle, such as another car or a pedestrian. It's about the vehicle, not your cargo.
• Who buys it: The vehicle owner or operator.
• Is it required? Yes. Under Directive 2009/103/EC, every EU Member State must make sure vehicles based on its territory are covered by civil liability insurance, valid throughout the EU. Vehicles registered outside the EU generally need a valid green card or border insurance on entry.

2. CMR Liability Insurance (Carrier's Cover)

• What it covers: The carrier's legal liability for loss, damage or delay of goods in international road transport under the CMR Convention.
• Who buys it: The carrier.
• Limit: Compensation for lost goods is capped at 8.33 SDR per kg of gross weight, unless a higher value was declared in the CMR note. For damage, the carrier pays the loss in value, up to the same cap.
• Want the details? Read our full guide to CMR insurance.

3. Cargo Insurance (Goods in Transit)

• What it covers: Physical loss of or damage to the goods themselves, according to the policy. It doesn't depend on proving the carrier was at fault.
• Who buys it: It depends on your sales contract. Under Incoterms 2020, only CIF (sea transport) and CIP (any transport mode, including road) oblige the seller to arrange insurance. Under other terms, neither side is obliged, so whoever carries the risk should decide whether to insure.
• Cover levels: Cargo policies are often based on the standard Institute Cargo Clauses (2009 edition). These are marine and air cargo terms, so ask your insurer which conditions apply to road transport.
  • Clause A (all risks): Covers all risks of loss or damage except those expressly excluded.
  • Clause B: Covers only the risks it lists.
  • Clause C: Also lists its risks, and is the narrowest and cheapest, aimed at major events like fire or collision.
• Good to know: War and strikes aren't covered by these clauses and are bought separately. Wording differs between insurers, so always read the policy.

4. Freight Forwarder's Liability Insurance

• What it covers: The forwarder's legal liability for loss or damage to goods in transit while they're responsible for them, as set out in the forwarding contract and the conditions that apply. Some policies add related risks, such as legal costs.
• Who buys it: The freight forwarder.
• Limit: The forwarder's liability is usually limited, so it may not match the full value of the goods. Cargo insurance fills that gap.

Other Covers Worth Knowing

• Own-vehicle damage cover: Covers damage to the truck itself. It's typically optional, unlike motor liability.
• Warehouse keeper's liability: Some forwarder policies can include liability for goods stored as a standalone service.

Policies vary, so always read the wording.

How They Work Together: A Simple Example

A truck is carrying electronics to Germany and has an accident.

• Motor liability pays for damage to the other vehicle.
• CMR insurance responds if the carrier is liable for the damaged electronics, up to the cap.
• Cargo insurance can pay the cargo owner for the damaged goods directly, according to the policy.

How to Choose: 4 Quick Checks

• Check the value: Is your cargo worth more than the carrier's CMR limit? If yes, consider cargo insurance or declaring a higher value. See CMR insurance for how the limit works.
• Check who carries the risk: Look at your sales contract and Incoterm to see when the risk passes from seller to buyer, and who has to insure.
• Check the wording: Look at exclusions, deductibles and what the policy considers covered transit.
• Keep your paperwork clean: A correct CMR note makes any claim easier.

FAQ

• What are the main types of freight insurance? Motor liability, CMR liability insurance, cargo insurance and freight forwarder's liability insurance.
• What's the difference between CMR insurance and cargo insurance? CMR insurance covers the carrier's liability for your goods, up to a legal cap. Cargo insurance covers the goods themselves for their owner, according to the policy.
• Is freight insurance mandatory? Motor third-party liability insurance is compulsory for vehicles in the EU. Other types depend on national rules and your contracts.
• Who is responsible for insuring goods in transit? It depends on the sales contract. Under Incoterms 2020, only CIF and CIP require the seller to insure. Under other terms, neither side is obliged.
• What does "all risks" cargo insurance mean? It covers all risks of loss or damage except those expressly excluded in the policy. It doesn't mean every loss is covered.