Insurance Policy

In foreign trade, an Insurance Policy typically refers to the formal insurance contract document issued by an insurance company after the seller or buyer insures the goods for transportation. It is not only the basis for claims but also one of the common documents for negotiation under a letter of credit. Usage scenarios include: under CIF or CIP terms, the seller is responsible for insuring and submitting the policy; when a letter of credit requires submission of an insurance policy, banks will strictly review its contents. Points to note: the policy date must not be later than the shipment date; the insured amount is usually 110% of the invoice value; the risks covered must comply with the contract or letter of credit; the name of the insured and the endorsement method must be correct. Compared with an Insurance Certificate, an Insurance Policy is a formal contract with stronger legal effect, while an Insurance Certificate is a simplified proof and is not accepted under some letters of credit. Unlike a Cover Note, a Cover Note only indicates temporary insurance and is generally not accepted by banks. Therefore, foreign trade practitioners should ensure that the policy terms are strictly consistent with the letter of credit to avoid discrepancies.