Types of Insurance Documents
How many types of Insurance documents are there? When to insure export import cargo? What are the reasons to insure import export cargo? How to insure export cargo?
There are three types of insurance documents:
- (a) Insurance Policy: The insurance policy sets out all the terms and conditions of the contract between the insurer and insured.
- (b) Certificate of Insurance: It is an evidence of insurance but does not set out the terms and conditions of insurance. It is also known as ‘Cover Note’.
- (c) Insurance Broker’s Note: It indicates insurance has been made pending issuance of policy or certificate. However, it is not considered to be evidence of contract of insurance.
WHEN AND WHY TO INSURE
Before shipment of goods, exporter has to insure to goods. Date of coverage in insurance policy should always be earlier o the date of shipment of goods, then only insurance covers totally. Banks insist the date of insurance to be earlier to the date of shipment of goods, at the time of negotiation of documents. Any person who has ‘insurable interest’ in the goods only can insure. Exporter is said to have interest in the safe arrival of goods. Equally, its loss, damage or detention will prejudice exporter. When the cargo is sent on CIF basis, exporter invariably takes marine insurance, as it is his duty to cover the risk. Till ownership in goods is transferred, in his own interest, exporter has to take the coverage. There is no obligation to the exporter to take insurance, after transfer of ownership. Still, it will be wise for the exporter to take adequate insurance policy till the goods reach the end of voyage. Here are the reasons:
Related post : why-to-insure-export-goods
risks-not-covered-by-marine-insurance- (A) Importers insurance may be inadequate.
- (B) In case of insolvency of the importer, claim amount may go to the benefit of the importers creditors and exporter would not receive the payment.
- (C) Foreign exchange problems could complicate the remittance of insurance claim amount to the exporter.
HOW TO INSURE
There are two ways to insure. First, take insurance policy as and when shipment is made. Those exporters, who make shipment now and then, do this. The second and common mode is to take open policy. Under open policy, the exporter does not have to take insurance contract , every time, as and when shipment is made. He pays insurance premium, in advance, one year. The insurance company undertakes to indemnify the insured up to the amount of the policy. Shipment of goods to the extent of the policy amount is covered. A brief declaration by the exporter about the basic facts of shipment would do. A great volume in exports business prefers this method for the following obvious advantages:
- (a) Exporter enjoys automatic and continuous protection. Even if there is delay in declaration or exporter has overlooked to submit declaration, the shipment is covered provided the delay and oversight are not intentional.
- (b) Trouble of taking insurance policy, each time, is avoided.
- (c) Exporter will have prior knowledge of the premium amount and so exporter can quote competitive rate for this exports.
- (d) Better relationship between the exporter and insurance company will be developed, so better advice would be available. As the insurance company understands the requirements in a better way, the insurance company can develop tailor-made protection to the exporter.
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