Cause of Loss

Cause of Loss is a core term in international trade insurance and claims, referring to the direct or root cause that leads to the loss or damage of goods. Under trade terms such as CIF and CIP where the seller arranges insurance, the insurance policy usually specifies the covered causes of loss, such as natural disasters, accidents, and extraneous risks. Usage scenarios mainly include: when reporting a claim to the insurance company, the cause of loss must be clearly identified; in a claim letter, the cause of loss must be evidenced to determine liability; in letter of credit transactions, if an insurance policy is required, the bank will examine whether the covered causes of loss cover the risks stipulated in the contract. Notes: The cause of loss must be consistent with the insured risks in the insurance clauses, otherwise the claim may be rejected; also, a distinction must be made between proximate cause and remote cause, as insurance compensation is usually based on the proximate cause. Difference from other terms: Cause of Loss emphasizes the objective event that triggers the loss, while Extent of Loss focuses on the magnitude of the loss, and Loss Survey is the process of determining the cause and extent. Foreign trade practitioners should accurately identify and record the cause of loss to protect their right to claim.