Contract insurance is not a standard term in foreign trade. It usually refers to the insurance clauses agreed upon by the buyer and seller in the contract, i.e., who is responsible for taking out insurance, the type of insurance, the insured amount, the insurance currency, and the rights to claims, etc. It is commonly seen in trade terms such as CIF and CIP where the seller arranges insurance, and also in FOB and FCA where the buyer arranges insurance. Usage scenarios include: clarifying insurance obligations, avoiding underinsurance or wrong insurance, and ensuring claim rights. Points to note: it must match the trade term (e.g., under CIF the seller insures against minimum risks), specify the insurance beneficiary, deductible, insurance period (warehouse-to-warehouse clause), and ensure the insurance policy is consistent with the contract. Unlike 'open cover', contract insurance is agreed on a transaction-by-transaction basis; unlike an 'insurance certificate', the latter is a proof document. If not stipulated in the contract, it is handled according to international trade practices.
📝 Examples
1. In a CIF contract, the contract insurance clause stipulates that the seller must insure against all risks for 110% of the invoice value and use a policy from the People's Insurance Company of China. (Note: clarifies the seller's insurance obligation and coverage)
2. Under an FOB contract, the buyer arranges contract insurance on its own and requires that the insured party on the policy must be the buyer, so that it can claim directly in case of cargo damage. (Note: the buyer's requirement for insurance rights when arranging insurance)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner