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Insurance Clauses and Sales Contract Terms with advice on how they differ

Policy Format: We use Market Clauses (Institute Clauses). The policy we produce is completely flexible and can be tailored into a bespoke wording that is suitable for you.

Institute Cargo Clauses (A)

This is the widest and most commonly used cover in the Marine Market. It provides “all risks” cover against physical loss or damage (total or partial) to the goods. Cover is also provided for general average sacrifice, where insurers contribute to any loss suffered where cargo is jettisoned to ensure the safe continuation of the whole voyage.

Institute Cargo Clauses (B)

This clause grants cover for specified perils, such as loss or damage caused by :-
fire and explosion

  • a major accident to the vessel or overturning or derailment of the land conveyance
  • earthquake, volcanic eruption or lightning
  • general average sacrifice
  • sea, lake or river water (not rain water)
  • total loss of any package overboard or dropped during loading/unloading.

Institute Cargo Clauses (C)

As per Institute Cargo Clauses (B) but cover is not granted for loss or damage caused by :-

  • earthquake, volcanic eruption or lightning
  • sea, lake or river water (not rain water)
  • total loss of any package overboard or dropped during loading/unloading.

Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo)

War is covered whilst waterborne and Strikes (including terrorism) is covered on land.

Endorsements, Extensions and Exclusions

Too numerous to mention. As mentioned above, the policy can be tailored to widen or restrict the cover accordingly.

Insurance Premium Tax

IPT does not apply to commercial imports or exports. It does, however apply to personal shipments imported or exported and sendings within the U.K.

Common Sales Contract Terms

Marine Cargo Insurance is the insurance of goods transported between countries, by sea, air or land conveyances for Companies that import or export goods or for Freight Forwarders or Shipping Agents.

The contract terms of sale or purchase will determine who should arrange the insurance.

The most common ones are described below: –

Terms Seller’s Responsibilities Buyer’s Responsibilities

Ex-works

Make the goods available at their premises. Take delivery of the goods from the seller’s premises.
Make arrangements at own cost and risk to bring the goods to the destination.
Arrange the insurance.

F.O.B.

Deliver the goods on board. Nominate the carrier.

Free on Board

Provide export licence and pay export taxes and fees. Contract for the carriage and pay the freight.
Provide a “clean on board” receipt. Pay loading costs to the extent that they are freight.
Pay loading costs. Pay unloading costs.
Arrange insurance up to point when the goods pass over the ship’s rail. Arrange insurance from after the point when the goods pass over the ship’s rail.

C & F Cost & Freight

Contract for the carriage and pay the freight to the named destination. Deliver the goods on board. Accept delivery of the goods upon shipment, when the invoice and the bill of lading are tendered to him.
Provide export licence and pay export taxes and fees. Pay unloading costs to the extent that they are not
Provide the buyer with the invoice and a included in the freight.
“clean on board” bill of lading. Pay loading costs.
Pay unloading costs to the extent that they are freight.
Arrange insurance up to point when the goods Arrange insurance from after the point when
pass over the ship’s rail. the goods pass over the ship’s rail.

C.I.F.

Contract for the carriage and pay the freight to the named destination. Accept delivery of the goods upon shipment, when the invoice, the bill of lading and the

Cost, Insurance and Freight

Deliver the goods on board. Provide export licence and pay export taxes and fees. Provide the buyer with the invoice and a evidence of insurance are tendered to him. Pay unloading costs to the extent that they are not included in the freight.
“clean on board” bill of lading and evidence of insurance.
Pay loading costs.
Pay unloading costs to the extent that they are freight.
Contract for the insurance of the goods during the carriage and pay the insurance premium.

Benefits to Exporters of Selling on C.I.F. Terms

  • Controls the cost of Marine Insurance and develop commercial flexibility by passing on the cost of Insurance (within the C.I.F. price) to the overseas Buyer.
  • Tailor the conditions of Marine Insurance to meet the precise needs of both the Exporter and the overseas Buyer.
  • Avoid the need for, and the cost of separate Marine Insurance in the name of the Exporter, to cover the risk on the goods until the risk passes to the overseas Buyer under the terms of the sales contract.
  • Save the need for, and the cost of, Seller’s Interest Insurance. This type of insurance protects the Exporter against loss or damage to the goods in cases where the overseas Buyer fails to take up the goods and the risk, in respect of loss or damage remains with the Exporter.
  • Information is available to the Exporter from Insurers in respect of claims paid to the overseas Buyer for loss of or damage to the goods. This information can assist the Exporter with risk management to help reduce future losses. If, however, sales are made on cost and freight terms, with insurance arranged by the overseas Buyer such useful details of loss or damage are not usually available to the Exporter. They may, therefore, be left with the impression that their exports are being delivered safely.

Benefits to Importers of buying on Ex Works or C & F Terms

  • Control of premium costs. By importing on C.I.F. terms (with insurance arranged by the Exporter) the Importer pays a premium, within the C.I.F. invoice price, even if a separate charge is not specified in the invoice. The Importer has no control over, and often no knowledge of, the amount of the premium charge.
  • By effecting their own Marine Insurance, the Importer can arrange the policy of insurance conditions to meet their exact requirements.
  • By importing on C.I.F. terms they receive an overseas issued policy with conditions arranged by the supplier, that may not suit the Importer. The Importer also has no opportunity to select an Insurer who offers top security and specialises in Marine Insurance. If the Importer is responsible for the insurance they will be able to use his current broker, who is familiar with their needs, to arrange the most suitable cover.
  • Importers buying on C.I.F. terms who need to make a claim will have to do so under an overseas issued insurance policy. Even if the claim is a straightforward one, they will find that they may have to wait for weeks (or even months) whilst documents are sent overseas. If there is any dispute over the claim they will find themselves at the mercy of an insurer in an overseas country over whom they have no commercial leverage. Should any legal action become necessary, the difficulties of bringing a lawsuit in a foreign country are obvious.
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