In international trade, cargo insurance is essential to ensure the safety of goods during transportation. Depending on the mode of transport and type of goods, export cargo insurance can be categorized into various types. Understanding these insurance types helps businesses choose the appropriate coverage for their exports.
Types of Export Cargo Insurance
Due to the varying nature of traded goods, different insurance types are required. Currently, global cargo transportation insurance can be divided into the following categories:
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Marine Cargo Insurance
- Free from Particular Average (FPA): Covers total or partial loss of the entire shipment due to natural disasters or accidents involving the transport vehicle.
- With Particular Average (WPA): In addition to FPA coverage, it includes partial losses caused by natural disasters like bad weather.
- All Risks: Covers all losses during transportation, including those not covered by FPA and WPA.
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Land Cargo Insurance
- Overland Transportation Risks: Covers losses during overland transportation.
- Overland Transportation All Risks: Covers all losses beyond the basic overland transportation risks.
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Air Cargo Insurance
- Air Transportation Risks: Covers losses during air transportation.
- Air Transportation All Risks: Covers all additional losses beyond the basic air transportation risks.
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Parcel Post Insurance
- Parcel Post Risks: Covers losses during postal delivery.
- Parcel Post All Risks: Covers all additional losses beyond basic postal risks.
Cargo Insurance Coverage
Marine cargo insurance coverage is divided into basic and additional coverages:
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Basic Coverage:
- Free from Particular Average (F.P.A.): Covers total or partial loss of the entire shipment due to natural disasters or accidents involving the transport vehicle.
- With Particular Average (W.P.A.): In addition to F.P.A. coverage, includes partial losses caused by natural disasters.
- All Risks (A.R.): Covers all losses during transportation, including those not covered by F.P.A. and W.P.A.
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Additional Coverage:
- Includes risks such as theft, non-delivery, freshwater damage, shortfall, leakage, breakage, packaging damage, contamination, non-delivery, and rejection. These additional coverages cannot be insured separately.
Insurance Documents
Insurance documents are contracts between the insurer (insurance company) and the insured (policyholder, usually the exporter or importer). When the insured goods suffer a loss within the coverage scope, these documents serve as the basis for claims. The main types of insurance documents are:
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Insurance Policy:
- Also known as the comprehensive policy, it includes detailed information about the insured party, goods description, transport means, coverage type, origin and destination points, insurance duration, insured amount, responsibilities, and rights and obligations of both the insurer and the insured.
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Insurance Certificate:
- Known as the simplified policy, it contains similar information as the insurance policy but lacks detailed terms about the rights and obligations. It is a streamlined form of the insurance policy but holds the same legal effect.
Calculation of Insurance Premium
When insuring, the insurance amount is typically the CIF (Cost, Insurance, and Freight) value plus an additional 10%. The calculation formula is:
Insurance Amount = CIF Value x (1 + Additional Percentage)
Insurance Premium = Insurance Amount x Insurance Rate
In practice, for goods valued below $2,000, simplified procedures are often used, typically charging around 100 RMB as the insurance premium.