Sum Insured

Sum Insured is a core term in foreign trade cargo transportation insurance, referring to the amount declared by the insured to the insurance company, used to calculate the premium and determine the maximum compensation limit. It is usually based on the invoice amount (CIF or CIP price) and determined by adding a certain percentage (commonly 10%) as agreed by both buyer and seller, to cover expected profits and miscellaneous charges. Usage scenarios include: exporters arranging cargo insurance, importers requiring the seller to insure, letters of credit stipulating insurance clauses, etc. Precautions: The sum insured must not exceed the insurable value, otherwise the excess portion is invalid; the added percentage must comply with the letter of credit or contract requirements; the party responsible for insurance differs under different trade terms (e.g., under CIF the seller insures, under FOB the buyer insures). Difference from 'Insurable Value': Insurable value is the actual value of the goods, while sum insured is the insured amount; the two may be equal or the sum insured may be higher than the insurable value. Difference from 'Compensation Limit': The compensation limit is the actual maximum payout by the insurance company, usually equal to the sum insured, but the deductible will reduce the actual compensation.