Industry News & Tips

Placing Your Cargo Insurance

August 25, 2007

Gene Horton

When Should I Insure My Export Shipments?  

This question is too often confused with "When do I have to insure my export shipments"? There is a world of difference between the two.

First, you should review the contract and terms of sale - they will determine which party is responsible to insure the export shipment. An example would be when the price quoted to a prospective customer is on a C.I.F. (Cost, Insurance, Freight to Destination) basis. C.I.F. sales should be equal to the cost of your shipment landed at the port of destination. This includes the cost of insurance.

Other forms of contracts of sale - F.O.B. (Free on Board Vessel), F.A.S. (Free Along Side Loading Port), and C & F (Cost and Freight to Destination) - leave the responsibility of providing the marine insurance to your customer. You may or may not choose to provide the insurance; an agreement between the two parties is all that is necessary. There are times when you should obtain the insurance for your own economic self-protection. This is decided by determining whose money is at risk - which is determined by the Terms of Payment.

If the Terms of Payment are either "Cash in Advance" or "Letters of Credit," your exposure to financial loss is very limited. Insuring these shipments is an option you may want to consider.

If, however, the Terms of Payment are one of the following, you should arrange for the insurance, because your money is at risk: "Draft Terms," "Open Accounts," "Consignments" and "On Approval" just to name a few.

In some cases, a shipment may be exposed to potential loss for two or more months before you have received payment for it. Should a loss occur, are you positive that you will receive full payment for damaged goods? When will you receive it? Maybe the shipment was totally destroyed and your customer failed to insure it. Only by arranging for the insurance yourself can you be sure that your assets are protected. And there are advantages for your customer as well.

·  If the shipment is lost before it arrives in your customer's country and the customer allows you to process the claim in the United States, the claim will be paid in U.S. dollars. This money could be applied immediately to the cost of a replacement shipment.

·  You may be able to obtain broader coverage for a lower price than you or your customer can.

·   The possibility of uninsured shipments due to misunderstandings is eliminated. Your coverage           automatic.

·    The insurance is "Warehouse-to-Warehouse." Coverage begins from the time the shipment leaves your warehouse until it reaches the warehouse of your customer. There are no gaps in coverage.So when you are making the decision whether to insure a shipment or allow your customer to seek coverage, make sure that you ask the right questions. It can make a world of difference. If you have any questions contact Gene Horton at or 800-553-3624 ext131