Cargo Insurance refers to insurance in international trade transportation where the insured (usually the seller or buyer) purchases coverage from an insurance company, with the goods as the subject matter of insurance. When the goods suffer losses due to natural disasters, accidents, or other risks, the insurance company provides economic compensation as agreed. It is widely used in sea, air, land, and multimodal transport. Key points include: specifying the insurance coverage (e.g., FPA, WPA, All Risks), insured amount (usually 110% of invoice value), duration of insurance liability (warehouse-to-warehouse clause), deductible, and claim time limit. Unlike 'carrier liability,' cargo insurance is a commercial insurance independent of the transport contract and remains valid even if the carrier is exempt from liability. It differs from 'export credit insurance,' which covers buyer credit risks rather than loss of the goods themselves. Foreign trade practitioners should choose appropriate trade terms in contracts (e.g., CIF requires the seller to insure, FOB requires the buyer to insure) and ensure insurance documents comply with letter of credit requirements.
📝 Examples
1. Under CIF terms, the seller must insure against All Risks at 110% of the invoice value and submit the insurance policy along with the bill of lading to the buyer. (Note: Under CIF, the seller has the obligation to insure, and the insurance policy is one of the documents for settlement.)
2. Because the goods were partially damaged by a storm during transit, the buyer claimed compensation from the insurance company with the cargo insurance policy and eventually received 80% of the loss. (Note: Cargo insurance provides risk protection for the buyer, and claims require documents such as the insurance policy and inspection report.)
💡 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