When an insured shipment arrives damaged, most importers expect the insurance to cover what they lost. Many find out at claim time that it doesn't — not because the policy was invalid, but because the amount insured was less than the actual loss. Underinsurance is one of the most consistent and avoidable insurance mistakes on the China-Africa corridor, and it's directly rooted in how importers think about cargo value.
The Underinsurance Gap: Where It Comes From
The most common approach to marine cargo insurance among African importers is to insure at the purchase price on the commercial invoice. This feels logical — it's what was paid. But the purchase price is rarely the full measure of what is actually lost when cargo is damaged or destroyed.
Consider what a total loss actually costs an importer:
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The purchase price of the goods — the invoice value you paid to your Chinese supplier.
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Ocean freight — paid to the carrier regardless of whether the goods arrive intact. Under most Incoterms, this cost is gone the moment the vessel sails.
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Import duties and taxes — assessed and paid at the destination port. A total loss after duties have been assessed still generates a tax liability in most African markets, even if the goods themselves are destroyed or seized.
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Your expected profit margin — the commercial reason you placed the order. A total loss doesn't just eliminate the goods; it eliminates the margin you would have earned on their sale.
The internationally recognised minimum insured value for marine cargo under standard practice: CIF value (cost of goods + insurance premium + freight) plus 10%. The additional 10% represents the importer's anticipated profit. Insuring at invoice value alone routinely leaves a gap of 20 to 40% between what is insured and what is actually lost. Based on Institute Cargo Clauses standard practice
How to Calculate the Correct Insured Value
The correct calculation isn't complicated, but it requires using the right inputs:
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Start with the CIF value — cost of goods plus insurance premium plus freight to the destination port. If you're shipping FOB and arranging freight separately, add the freight cost to your purchase price to arrive at the CIF equivalent.
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Add 10% — the standard commercial mark-up representing your anticipated profit margin. This is the figure recognised in international insurance practice as the minimum for adequate coverage. If your actual margin on the goods is higher than 10%, insure at your actual CIF plus your actual margin percentage.
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Review the insured value for each shipment — not annually. Freight costs fluctuate. Purchase prices change between orders. An insured value set six months ago may no longer reflect the actual exposure on the current shipment.
⚠️ Watch Out: Average clauses in marine insurance policies mean that if you are underinsured, your claim payment is proportionally reduced even on partial losses. If you insure at 70% of the correct value and suffer a loss equivalent to 50% of the cargo, your claim may be settled at 70% of the loss — not the full 50%. Underinsurance doesn't just affect total loss claims. It reduces every claim proportionally.
👉 Pro Tip: When arranging insurance under CIF terms through your supplier, check the declared insured value on the insurance certificate. Many suppliers insure at invoice value as a default — and unless you've specifically instructed otherwise, you may be underinsured on every shipment where the supplier arranged the policy. Under FOB terms, you arrange your own insurance and control the insured value directly. This is one of the practical advantages of FOB over CIF for importers who want to manage their risk properly. See: Incoterms Explained: What You Actually Need to Know.
Want to review your cargo insurance approach before the next shipment?
Our Trade & Compliance team can advise on correct insured values and coverage terms for your cargo type and route.
Talk to Our Team →Last reviewed: June 2026 · Category: Risk & Insurance
Related articles: Incoterms Explained · Standard Operating Procedures for Claims · Smart Planning to Avoid Demurrage & Detention
