For cross-border shipments, the key to avoiding pitfalls when purchasing marine insurance is to consider the following three key points:
Choosing the Right Insurance Type: The basic marine insurance policies include FPA, WPA, and All Risks, with progressively higher levels of coverage. FPA primarily covers total loss, general average, and losses caused by major accidents like grounding and fire, but does not cover particular average. WPA provides additional coverage for partial loss of cargo due to natural disasters, in addition to FPA. All Risks offers the broadest coverage, encompassing WPA coverage as well as 11 general additional risks. In addition to the basic insurance, sellers can also add additional risks as needed, such as collision and breakage for fragile goods, and war and strike risks for goods shipped to unstable regions.
Determine an Reasonable Insurance Amount: The insurance amount is generally set based on the actual value of the goods, typically including the value of the goods themselves, shipping costs, customs duties, and other factors, plus a percentage of expected profit. A typical percentage is 110% of the invoice value, but the maximum cannot exceed 130%. If the insurance amount is too low, the seller will not receive adequate compensation in the event of damage to the goods, while setting it too high will result in unnecessary insurance costs.
Choose a Good Insurance Company: The insurance company’s service quality and reputation will directly impact subsequent claims processing. Sellers should research the insurance company’s financial health and claims services. Consult industry experts, review reviews and ratings, and consult with peers and industry experts to learn about the performance of different insurance companies. Choose an insurance company with a good reputation, stable finances, and efficient claims processing to ensure timely and smooth compensation in the event of shipping problems.
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