Insurance Clause

The Insurance Clause is a provision in a foreign trade contract or letter of credit that specifies the responsibilities for cargo transport insurance, insured amount, types of coverage, the party responsible for insuring, and claims settlement. Its core contents include: who insures (usually the seller or buyer, depending on the trade term, e.g., under CIF the seller insures, under FOB the buyer insures), types of coverage (such as FPA, WPA, All Risks, and additional risks), insured amount (typically 110% of the invoice value), insurance currency, and place of claims settlement. It is commonly used under trade terms like CIF and CIP where the seller is responsible for transport insurance. Precautions: It must strictly comply with letter of credit requirements to avoid discrepancies in coverage or insufficient insured amount; if the letter of credit is unclear, banks will process according to the minimum coverage. Distinction from other terms: The insurance clause differs from the shipment clause, which stipulates delivery time and method; it also differs from the payment clause, which stipulates payment methods. Foreign trade practitioners should ensure the insurance clause matches the trade term, letter of credit, and actual risks to prevent refusal of payment or failed claims.