Over Insurance

Over Insurance refers to the act of an insured declaring an insured amount to the insurance company that exceeds the actual value of the insured subject matter or the insurable interest. In foreign trade, it commonly occurs in scenarios such as cargo transportation insurance and credit insurance. For example, under a CIF contract, if the seller insures based on an invoice amount of USD 100,000 but insures for USD 120,000, it constitutes over insurance. Usage scenarios include: the buyer deliberately over-insures to avoid exchange rate fluctuations or expected profit losses; or the seller over-insures due to calculation errors. Notes: According to the principle of indemnity, the excess portion is invalid, and the insurance company only compensates based on actual losses, and may refuse to refund the excess premium; if there is fraudulent intent, it may lead to the insurance contract being void. It is the opposite of 'Under Insurance', which means the insured amount is lower than the actual value, and the insured must bear part of the loss themselves. Unlike 'co-insurance', over insurance does not involve proportional sharing. Foreign trade practitioners should ensure that the insured amount matches the invoice amount, expected profit, etc., to avoid over or under insurance.