Insurance Compensation

Insurance Compensation refers to the payment made by the insurer to the insured under a contract of cargo transportation insurance in international trade, when the subject matter insured (such as goods) suffers loss due to perils within the scope of cover (e.g., natural disasters, accidents, theft, non-delivery, etc.). It typically applies under CIF or CIP terms where the seller arranges insurance but the right to claim may transfer to the buyer; or under FOB or CFR terms where the buyer arranges insurance and claims. Precautions: the insured must notify promptly, provide claim documents (e.g., insurance policy, bill of lading, invoice, cargo damage/shortage certificate, survey report), and observe the time limit for claims (usually 2 years). Insurance Compensation differs from 'insurance benefit' which may refer to payment under life insurance; and differs from 'carrier's compensation' which is based on the contract of carriage, whereas insurance compensation is based on the insurance contract, and the insurer may acquire subrogation rights after payment. Additionally, the compensation amount is usually capped at the insured amount and may be subject to a deductible.