A Cargo insurance certificate is a Important document in export-import transactions. Insurance covers any type of damage or loss, when goods are in the main carriage due to unforeseen events. destined from origin port to entry port. It gives the coverage for waterways, roadways and air shipment. Cargo insurance gives you the certainity that, if something goes wrong with goods in transit, you will receive compensation of the value based on the commercial invoice.
The insurer gives the insurance policy certificate to the shipper or buyer, whoever responsible for the cargo based on the incoterms.
It certifies that the cargo is insured while in transit and is supported by a copy of an insurance policy. It is also called a special cargo policy or a cargo insurance certificate.
components of cargo insurance certificate:
- Name of Insured: Identifies the individual or entity purchasing the policy.
- Subject Matter Insured: Specifies what is covered (e.g., vessel, cargo, or liability).
- Risks Insured Against: Describes the risks covered by the policy.
- mode of transportation: waterways, roadways and air shipment.
- Name of carrier and Officers: Provides carrier details.
- Description of Voyage or Period of Insurance: Indicates the coverage duration or voyage details.
- Amount and Term of Insurance: Specifies the insured amount and policy duration.
- Premium: The cost of the insurance.
Factors that influence cargo insurance premiums.
Insurers consider these factors when determining cargo insurance costs. which include:
- Cargo Value: The higher the value of the goods being insured, the higher the premium.
- Risk Exposure: Insurers assess risk factors such as the type of cargo (e.g., perishable goods, hazardous materials), shipping routes, and storage conditions.
- Mode of Transport: Premiums vary based on whether the cargo is transported by sea, air, road, or rail.
- Coverage Type: Comprehensive coverage (like ICC (A)) generally costs more than basic coverage (like ICC (c)).
- Claims History: A good claims record may lead to lower premiums.
- Security Measures: Implementation of security protocols (e.g., tracking systems, secure packaging) affects premiums.
- Incoterms: The chosen Incoterm impacts risk allocation and, consequently, premiums.
Institute Cargo Clauses
The Institute Cargo Clauses are standard forms of marine cargo insurance that provide coverage for goods in transit. There are 3 types of insurance which cover the waterway, roadway, airway movement. Class (A) covers all the risk whereas Class (C) covers minimum risk. If shipment is through airway then institute cargo clause (air) is applicable
Institute cargo clauses types:
The differences between the Institute Cargo Clauses (A), (B), and (C):
- ICC (A):
- Coverage: All risks of loss or damage to the insured goods, except as specifically excluded.
- Includes: General average, salvage charges, and liability under the “Both to Blame Collision Clause.”
- Exclusions: Examples include wilful misconduct, ordinary leakage, wear and tear, delay, and insolvency.
- ICC (B):
- Coverage: Similar to (A), but with more exclusions.
- Exclusions: Broader exclusions, providing less comprehensive coverage.
- ICC (C):
- Coverage: Basic coverage, limited to specific named perils.
- Exclusions: Most exclusions compared to (A) and (B).
How do Cargo clauses impact insurance premiums?
The Institute Cargo Clauses (A), (B), and (C) can impact insurance premiums based on the level of coverage they provide:
- ICC (A): Offers comprehensive coverage, including most risks. Premiums tend to be higher due to broader protection.
- ICC (B): Provides less comprehensive coverage than (A). Premiums may be lower due to more exclusions.
- ICC (C): Basic coverage for specific named perils. Premiums are typically lower due to limited protection.
Insurers consider the risk exposure and coverage type when determining premiums.
Effective strategies in Reducing cargo insurance costs for businesses.
- Evaluate Coverage Needs: Assess the value of your cargo and choose coverage that aligns with your specific risks. Consider self-insuring low-value shipments and insuring high-value ones.
- Third-Party Providers: Opt for third-party insurance providers instead of direct carrier insurance. This can reduce costs by nearly 50%.
- Carrier Compliance: Verify carriers’ compliance with industry regulations, safety standards, and legal requirements. Prioritize compliant carriers to mitigate risks and avoid additional costs.
- Flexible Policies: Seek flexibility in insurance coverage. Choose options that match the majority of your transportation needs.
- Negotiate Premiums: Negotiate insurance premiums based on cargo type, shipping routes, and risk exposure. Regularly review and adjust coverage as needed.
Summary: cargo insurance protects your business, so finding the right balance between coverage and cost is essential.