marine insurance in India
In the early days of international trade it was common for cargo to be lost when vessels ran into trouble with sandbars, storms, or pirates. Shippers would demand compensation from the steamship companies, which often lacked the resources to make restitution but most small-scale importers and exporters purchase “all risk” coverage. This covers nearly all risks. It does not cover loss or damage caused by war, strikes, riots, civil disobedience, or “inherent vice in the cargo.” This means something in the cargo that destroys it, such as moth larvae in wool sweaters or deadly bacteria in shrimp. One can pay extra for riders (clauses) that protect against these risks. No standard cargo insurance covers late arrival or rejection of goods by buyers or government agencies. These are insurable risks, but the rates are high and many insurance companies refuse to insure against them. It is important for your marine insurance policy to contain a general average clause.
This means that, for example, if the ship is in a bad storm and some heavy cargo is jettisoned to save the rest, Packing, Shipping, and Insurance every shipper whose cargo is on that vessel is responsible for a portion of the value of the jettisoned cargo. Even though your cargo may be safe and sound, you cannot get it until the steamship line has been assured of payment for your share of the loss. Insurance can be port to port, warehouse to warehouse, or some combination of the two. Warehouse-to-warehouse policies cover the goods from the time they leave the exporter’s premises until they are in the importer’s premises. They are becoming increasingly common because it is simpler to buy one policy than to concern yourself with insurance on every carrier. What determines who must buy the insurance? It is the shipping term that is agreed upon.
The definition of each incoterm says who is responsible for insuring the cargo. Many problems can arise. Suppose, for example, that you are exporting CFR, on open account, and the cargo is lost. The foreign importer is obligated to pay you but may not do so until he collects from his insurance company. To speed up payment, you may get involved in helping your importer settle the claim. Or suppose you are importing CIF on a letter of credit and the cargo is lost. You will have to file a claim on the insurance company from which the exporter purchased coverage. This will be much easier if the exporter has used a sound, reliable company that has offices in the India. Whenever the other party to a transaction buys insurance to protect you, and you have doubts about the adequacy of coverage, you should consider purchasing contingent insurance.
This kind of coverage costs about half as much as regular insurance and pays only if there is covered loss or damage and, for some reason, the primary insurer does not pay. Large importers and exporters have “open” policies that automatically cover all shipments of their normal merchandise in their normal trading areas. The importer or exporter simply reports each shipment to his insurance company. It is customary to insure for the CIF value of a shipment, plus 10 percent of CIF. This means, for example, that if your goods are worth $9,000, the shipping cost is $900, and the insurance cost is $100, you should insure for $11,000 ($9,000 + $900 + 100 × 1.1). The extra 10 percent is to repay you for time and trouble, lost profit, and perhaps lost customers because you could not fulfill your obligations.
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