International trade cargo transportation insurance procedures

In the process of international sale and purchase of goods, which party is responsible for the insurance should be determined according to the price conditions agreed between the buyer and seller. If the transaction is made on FOB or CFR terms, the insurance should be handled by the buyer; if the transaction is made on CIF terms, the insurance should be handled by the seller.

1. The general procedure for cargo insurance is as follows.
A. Determine the amount of insurance
The insured amount is the basis for each insurance premium, and the basis for calculating compensation after the loss of goods. In accordance with international practice, the insured amount should be calculated according to the invoice, the expected profit of CIF.

B. Fill in the insurance policy
The insurance policy is the written application of the insured to the insurer, whose main contents include the name of the insured, the name of the insured goods, mark, quantity and packaging, the insurance amount, the name of the means of transport, the date of sailing and the place of origin and destination, the insured class, the date of insurance and signature, etc.

C. Pay the insurance premium and obtain the insurance policy 
The insurance premium is calculated according to the insurance premium rate of the insured class. The insurance rate is made according to the different insurance classes, different commodities, different modes of transportation, different destinations and with reference to the international rate level. It is divided into two types: "general cargo rates" and "specified cargo premium rates". The former is the general cargo rate, while the latter refers to the special cargo (e.g. certain fragile and perishable commodities), which is charged separately on top of the general rate.

After paying the insurance premium, the policyholder can obtain an insurance policy. The insurance policy actually constitutes the insurance contract between the insurer and the insurer, and is the proof of coverage sought by the insurer. In the event of loss or damage within the scope of insurance, the insured can claim compensation by the insurer.

D. Procedure for filing a claim
When the insured goods are damaged within the scope of insurance liability, the policyholder can make a claim to the insurer for compensation.

After the insured goods arrive at the destination, if the consignee finds that the whole piece is short or there is obvious damage, he should immediately ask the carrier or relevant parties for the proof of cargo loss or cargo difference, and contact the inspection agent appointed by the insurance company to apply for inspection and submit inspection report to determine the degree of loss; at the same time, he should make a claim to the carrier or relevant responsible parties. If it belongs to the insurance responsibility, you can fill in the claim list and claim from the insurance company together with the copy of bill of lading, packing list, original insurance policy, weighing list, repair and configuration fee certificate, visa or business record of the third party responsible party and the correspondence of the claim to the third party responsible party.

The claim should be submitted and processed within the validity period of the insurance, otherwise the insurance company may not process the claim. 

2. Insurance amount
According to the customary practice in the international insurance market, the insurance amount of export goods is generally calculated by adding 10% to the CIF price of goods. This additional 10% is also known as the insurance premium rate, which is the buyer's cost and expected profit for the transaction. If the customer requests an increase in the insurance mark-up rate to 20% or 30%, the premium difference should be borne by the foreign buyer. At the same time, if the foreign buyer requests a mark-up rate of more than 30%, he/she should first obtain the consent of the insurance company.

The formula for calculating the insurance amount is: Insurance amount = CIF cargo value × (1 + markup rate)

3. Freight insurance premiums
The policyholder pays the insurance premium in the agreed manner is the condition for the insurance contract to take effect. Insurance rates are determined by the insurance company according to a certain period of time, different types of goods payout rate, according to different insurance and destination. The insurance premium, in turn, is calculated according to the rates of the insurance rate schedule, the formula of which is

Insurance premium = insurance amount × insurance rate
If the insurance is insured according to CIF plus, the above formula can be changed as follows
Insurance premium = CIF × (1 + insurance premium rate) × insurance premium rate

4. Case
The CIF price of commodity 03001 is 10000 USD, the importer requires 110% of the transaction price to insure all risks (insurance rate 0.8%) and war risk (insurance rate 0.08%), calculated according to the above formula as follows.

Insurance amount = 10,000 × 110% = 11,000 (USD)

Insurance premium = 11000 × (0.8% + 0.08%) = 96.8 (USD)