Information on obtaining insurance and how insurance figures in some of the major incoterms used in international trade.


Generally speaking, all international shipments should be insured against loss or damage.

Obtaining insurance

• Many SME importers and exporters can approach their freight forwarders for coverage or buy insurance directly.
  
  
  
• Most SME shippers organize an "all-risk" coverage that covers all reasonable risks to a given shipment.
  
  
  
• Proof-of-insurance coverage is outlined and verified in a document known as a policy or insurance certificate. Insurance policy formats vary from insurer to insurer.
  
  
  
• The policy must be issued and signed by an insurance company or its authorized agent. If more than one original is issued is so indicated in the policy, all documents must be presented to the financing bank, unless otherwise specified in the letter of credit (L/C).
  
  Remember, it is the Incoterms which decide who is responsible for organizing insurance coverage. It is advisable when shipping to use a Group F Incoterm and import with a Group C Incoterm, and then move beyond use of these as your experience builds.
  
  Some common Incoterms and their insurance obligations are:
  
  
  
• CIF
  The exporter is responsible to insure on behalf of the buyer until goods arrive and are unloaded at the port of destination.
  
  
  
• FOB or CFR
  The importer is responsible to insure from the time the goods are loaded on the seagoing vessel.
  
  Click here to see a list of the most widely used Incoterms.
  
  If the other party is responsible for the insurance and you have doubts about the coverage, you may want to consider buying back-up insurance, called contingent insurance, which provides supplementary coverage that is activated in the event the primary insurer does not pay a legitimate claim.