FAR 47.102—Transportation insurance.
Plain-English Summary
FAR 47.102 explains when the Government does, and does not, insure Government property moving in commercial transportation. It covers the general rule that the Government keeps the risk of loss or damage to its property when that loss is not the legal liability of the carrier, and that it normally does not purchase insurance for property in the possession of commercial carriers. It then describes the narrow exception for special circumstances, where the Government may either buy insurance itself or require the carrier to accept full responsibility and insure that assumed liability, with the insurance cost treated as part of transportation cost. The section also points to Treasury regulations for shipments of valuables and requires the contracting officer to verify that any insurance purchase is legally permitted, funded, and properly documented. In practice, this section is about deciding who bears transportation risk, when insurance is justified, and how to make sure the contract file supports that decision.
Key Rules
Government keeps normal risk
As a general rule, the Government retains the risk of loss of or damage to its property when that loss is not the legal liability of a commercial carrier. The Government also generally does not buy insurance for its property while it is in the possession of commercial carriers.
Special circumstances exception
The Government may depart from the general rule only when special circumstances make insurance necessary and in the Government’s interest. In those cases, the Government may either purchase insurance itself or require the carrier to assume full responsibility and insure that responsibility.
Insurance cost is transportation cost
If the carrier is required to assume responsibility and buy insurance, the cost of that insurance is treated as part of the transportation cost. This means the insurance expense is not a separate, unrelated charge but part of the overall shipping cost.
Treasury rules for valuables
Shipments of valuables are subject to Treasury regulations in 31 CFR parts 361 and 362. Those rules may impose additional requirements or controls beyond FAR 47.102.
Legal and funding checks required
Before the Government buys insurance, the contracting officer must confirm there is no statutory prohibition and that funds are available. These are mandatory preconditions, not optional considerations.
File documentation required
When insurance is authorized under special circumstances, the contracting officer must document both the need for insurance and the authorization for it in the contract file. The file should show why the exception was justified and who approved it.
Responsibilities
Government
Generally retain the risk of loss or damage to Government property that is not the legal liability of commercial carriers, and generally avoid purchasing insurance for such property while it is in carrier possession.
Contracting Officer
Determine whether special circumstances justify insurance, verify there is no statutory prohibition, confirm funds are available, and document the need and authorization for insurance coverage in the contract file.
Carrier
If required by the contract, assume full responsibility for loss of or damage to Government property in its possession and purchase insurance to cover that assumed responsibility.
Agency
Ensure transportation risk decisions are made consistently with law, funding availability, and agency interest, and support the contracting officer in obtaining any needed approvals or funding.
Treasury Department / Secretary of the Treasury
Prescribe regulations governing shipments of valuables under 31 CFR parts 361 and 362, which may control or supplement handling and insurance requirements for those shipments.
Practical Implications
This section sets a default against buying transportation insurance, so contractors and contracting officers should not assume insurance is routine or automatic.
The phrase "special circumstances" is important but not self-defining; the file should clearly explain why the shipment is unusual enough to justify insurance.
A common pitfall is treating insurance as a separate convenience item instead of checking for statutory authority and available funds first.
If the contract shifts responsibility to the carrier, the insurance cost becomes part of transportation pricing, so it should be evaluated as part of the shipping arrangement, not as an afterthought.
For valuables or sensitive shipments, users should check Treasury regulations in addition to FAR requirements, because those rules may add mandatory controls or special handling requirements.
Official Regulatory Text
(a) The Government generally- (1) Retains the risk of loss of and/or damage to its property that is not the legal liability of commercial carriers and (2) Does not buy insurance coverage for its property in the possession of commercial carriers ( 40 U.S.C. 17307 ). (See part 28 , Bonds and Insurance.) (b) Under special circumstances the Government may, if such action is considered necessary and in the Government’s interest, (1) buy insurance coverage for Government property or (2) require the carrier to (i) assume full responsibility for loss of or damage to the Government property in its possession and (ii) buy insurance to cover the carrier’s assumed responsibility. The cost of this insurance to the carrier shall be part of the transportation cost. (The Secretary of the Treasury prescribes regulations regarding shipments of valuables in 31 CFR parts 361 and 362.) (c) (1) If special circumstances dictate the need for the Government to buy insurance coverage, the contracting officer shall ascertain that- (i) There is no statutory prohibition; and (ii) Funds for insurance are available. (2) The contracting officer shall document the need and authorization for insurance coverage in the contract file.