When it comes to feeding the global demand for manufactured goods, China is the leader of the pack. Sixty percent of the country’s trade in value travels by sea. Transporting goods by sea - it goes without saying - is risky. Accidents, bad weather, and other circumstances beyond your control can lead to your valuable cargo being damaged or lost. The only protection against losing your goods to the perils of the sea is marine cargo insurance. Really, there is no good reason not to insure your cargo.
In this piece, we discuss the importance of cargo insurance for your China shipments, how much it costs, and where to buy it from.
Marine cargo insurance covers the loss of or physical damage to goods while in transit by sea. Your cargo is covered against losses or damage (partial or total) caused by:
Note: Forwarding charges kick in when the journey is aborted and the cargo has to be forwarded to its intended destination. A survey fee is paid to a marine surveyor for inspection of the insured cargo. A reconditioning fee is paid to repair or recondition damaged cargo.
Marine cargo insurance doesn’t cover losses or damage caused by:
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When shipping to and from China, these are the main reasons why your cargo is safer with insurance than without:
Marine cargo insurance is generally affordable. According to Steve Fodor, Director of the US-based Association for Trade Compliance, cargo insurance costs less than half a percent of the shipment value. So, it makes little sense to cut back on it to save on shipping costs.
How do you calculate the insurance amount and premium? There’s a simple formula used by insurance companies across the world, including in China.
First, you need to know the ‘insured value’ of the consignment. Usually, insured value is CIF plus 10 percent, or 110 percent of CIF. The CIF Incoterm stands for Cost, Insurance, and Freight. The additional 10 percent covers incidental costs in case of cargo loss, such as the fee for processing the insurance claim. Therefore:
Insured value = CIF + 10%
The insured value is the maximum amount the insurance company is liable for in the event of cargo loss or damage covered under the insurance policy.
The premium you pay is a percentage of the insured value specified by the insurance company.
To know about incidental charges related to buying marine cargo insurance, click here
Read our guide to finding a freight forwarder in China here
Most trade experts say an insurance certificate is a must-have document when importing from China. The insurance certificate captures the main points of the marine cargo insurance policy in a single document. It acts as proof that a particular consignment is insured. It is issued by the insurer or insurance broker. In China (or anywhere else where it is required), the insurance certificate is an important document that must be presented during customs clearance. Because it allows for faster access to information regarding the shipment’s insurance status, it hastens the customs clearance process.
In an insurance certificate, you’ll find the following details:
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