Insuring the Goods


Goods Insurance

For most international trade transactions, the contract between the seller and the buyer should clearly state who is responsible for arranging insurance and in some cases the point at which the responsibility moves from the supplier to the buyer. This will be reflected in the Incoterms that are used in the contract. Irrespective of the responsibility it is important that the insurance cover is in place for the entire journey being undertaken and this should include any loading, unloading and temporary storage.  Think along the lines of ‘it is my responsibility once I have control/title to the goods from my supplier and it remains my responsibility until I sell the goods to my buyer and title has passed to them” this way at least the goods remain insured while in your care wherever they may be in transit or stored.

Supplier Insures Goods

Where the supplier is responsible for arranging the insurance, the insurance certificate or policy will be sent with the shipping documentation as evidence of cover. The documents may be sent direct or could come via an Import Documentary Collection or as one of the documents required under the Import Letter of Credit that the bank has issued on behalf of the buyer.  Insurance cover arranged by the supplier may end when the goods are landed at the port of arrival and this could leave an open risk for the buyer/importer which could include:     

•Cover needing to be arranged for the transport of goods from the port of arrival to the buyer’s/importer’s   premises, the third party storage facility/independent warehouse or those of the ultimate buyer   ​  

•Goods arriving damaged or incomplete at the port of arrival and this can lead to disputes between the seller and the buyer/importers. This can be avoided in part if the goods are inspected pre-shipment by an independent third party (or the buyer’s own local representative/agent in the country of the seller) and to avoid any doubt, a further inspection on arrival. Without the foregoing it is going to prove difficult as to where the loss or damage occurred.   ​  

•Delay in settlement of claims if the insurance is arranged through an overseas insurer.

How to mitigate some supplier insurance risks

Some of the above mentioned problems can be avoided by:     

•Extending the seller’s marine insurance cover to the ultimate destination with the buyer assuming responsibility for the insurance premium relating to the period after arrival at the port/ airport     

 •Separate insurance cover being arranged by the buyer covering the final stages of the transit though this may not resolve any demarcation disputes      

•The buyer takes responsibility for the insurance from the supplier’s premises through to the ultimate destination

Potential Risks in the time line

Consider some of the potential risks

STATUS - Goods leave suppliers premises

RISK - While in transit to port/airport  

STATUS - Goods at port/airport awaiting shipment

RISK - While waiting on quay or airport shed

STATUS - Goods Loaded

RISK - While on sea/ in air

STATUS - Goods arrive at port/airport

RISK - Arrival, unloading & transit to final destination/storage

STATUS - Goods arrive final destination

Goods Insurance

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Goods Insurance - FAQs

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