5 Types of Insurance Policies in International Trade

Oaktree Blog – In international trade, the risk of goods being lost or damaged during shipping cannot be ignored. Every transaction involving the shipment of goods carries a range of risks, from physical damage and lost goods to shipping delays. That’s why it’s important for businesses to protect themselves against potential losses by securing the right type of international trade insurance policy.

Types of Insurance Policies in International Trade

In this article, we’ll discuss the insurance policies commonly used in international trade, along with the features and benefits of each.

1. Marine Insurance Policy Types

Marine cargo insurance is a type of policy specifically designed to protect goods shipped by sea. It covers the risk of loss or damage during transit, including:

• Damage caused by severe weather: Such as storms or high waves that can damage goods.
• Ship accidents: Such as sinking or collisions that can result in lost goods.
• Theft: Goods lost due to criminal activity during transit.
• Marine cargo insurance typically offers two types of coverage: All Risks, which provides comprehensive protection against all risks, and Named Perils, which covers only the specific risks listed in the policy.

2. Cargo Insurance Policy Types

Cargo insurance is a policy that protects goods during shipping, whether by sea, air, or land. It covers loss or damage that may occur during transit. Risks covered by cargo insurance include:

• Physical damage: Goods damaged by impact or pressure during transport.
• Total loss: Goods completely lost during transit.
• Damage caused by improper handling: Goods damaged due to handling that does not meet standards.
• Cargo insurance can be customized to meet the shipper’s specific needs and the type of goods being shipped.

3. Aviation Cargo Insurance

Air cargo insurance is a type of policy designed to protect goods shipped by air. Given the speed of shipping and the risks associated with air transport, this policy provides coverage for:

Damage caused by an aircraft accident: Items damaged in an accident during flight.
Lost items: Items lost during air shipping.
Damage caused by airport handling: Items damaged due to improper handling at the terminal.

4. All Risks Insurance

All Risks insurance is a type of policy that provides comprehensive protection against all risks that may arise during the shipment of goods.

This policy covers unexpected loss or damage, except for specific risks explicitly excluded from the policy. Benefits of All Risks insurance include:

• Comprehensive coverage: Gives shippers peace of mind by covering nearly all risks.
• Simplicity: Makes the claims process easier, as there’s no need to prove the exact cause of the loss.

5. Limited Cargo Insurance

Limited cargo insurance is a policy that covers specific, predefined risks. It is usually less expensive than All Risks insurance, but also provides more limited coverage. The risks covered may vary depending on the agreement between the shipper and the insurance company.

Conclusion

In international trade, having the right insurance policy is an important step in protecting goods against the risk of loss or damage during shipping. Understanding the different types of insurance policies available can help businesses choose the coverage that best suits their needs.

This allows them to conduct trade transactions with greater confidence, knowing they’ve taken steps to protect their investments.