Insurance Certificate

Insurance Certificate: The Ultimate FAQ Guide

When importing from China, an insurance certificate is an important document you must have.

Below crucial facts, you must know.

What is an Insurance Certificate?

In this context, it refers to a document, which provides information regarding specific insurance coverage of a consignment.

It covers the cargo from loss or damage while in transit.

It contains details such as the insurance company, limits of coverage, policy number, consignee and valid period for the policy.

 Insurance policy sample

 Insurance policy sample

Why do you need Insurance when Importing from China?

It allows for faster access to information since it is regarded as an express version of an insurance agreement.

Thus, it is necessary since it enhances convenience by enabling you to save time.

It acts a proof of your insurance status given it is a summary of an insurance policy.

Therefore, you use it to demonstrate the validity of the policy rather than providing the entire insurance policy document,

It protects you when outsourcing services in case of a particular insurance hazard.

It can help in preventing multiple scenarios, which could lead to costly litigation.

A cargo insurance policy is necessary for protecting cargo interest against inevitable damage, losses and inconveniences.

This gives you peace of mind since you assured of compensation in case of unfortunate inevitable cargo loss or damage.

Can you use the same Insurance Certificate for Imports and Exports?

Not necessarily.

What happens is imports and exports are usually different products.

Every insurance certificate tends to cover specific commodities in transit at a particular moment.

The value of products, which insurance policy is often pegged on, also varies for imports and exports.

It, therefore, becomes relatively difficult to use the same insurance certificate for both exports and imports.

However, depending on your insurance provider, you can always get a general comprehensive insurance cover.

Obtaining this kind of document requires a special arrangement between the trader and the provider.

What is Included in Insurance Certificate?

It contains separate sections for various types of liability coverage. Some of the details include the following;

Policyholder – This is the consignee appearing of the certificate as being covered by the insurance.

Information surrounding the policyholder such as mailing address, contact details, operations they perform.

Policy number – It is a unique number, which the insurance company issues to the policyholder and uses it for locating your account.

Most insurance policy numbers combine both letters and digits to bring out the uniqueness.

Policy limit – It is the maximum amount of compensation the insurance company shall pay for particular cargo damage or loss.

Coverage limits are subject to various terms and conditions of the insurance policy.

Notably, every policy is unique based on various aspects, thus may incorporate a wide range of limits.

Policy valid period – This refers to the duration, which outlines the validity of the insurance policy.

Shipment details – These include, vessel name, ports of loading and discharge, descriptions of goods, and voyage number among others.

Amount of insurance premium – This is the money payable to the insurance company by the consignee or policyholder.

What is the difference between Insurance Certificate and Insurance Policy?

An insurance certificate is a document, which demonstrates proof of insurance coverage of a particular consignment.

It is issued by the insurance company or broker and used as part of the customs clearing document in international trade.

It incorporates a complete snapshot of insurance policy on a single document.

Insurance policy is a written document issued by an underwriter or insurance company to the policyholder or the insured.

This document is legally binding and defines the terms and conditions regarding the insurance contract.

The insurance policy also acts as a piece of legal evidence documenting the insurance agreement between the provider and the insured.

When do you need an Insurance Certificate when Importing from China?

Insurance certificate is a requirement whenever you are transporting a consignment from China to your respective delivery destination.

You should obtain it immediately your consignment leaves the supplier’s warehouse in China.

Once they leave the warehouse, the goods are exposed to several risks, which can arise even before they get to the port of loading.

You, therefore, need to ensure the policy covers the goods between the supplier’s warehouse and your warehouse.

In such, the validity period of the policy should factor in the dates between dispatch and receiving.

What is Cost, Insurance and Freight (CIF) Incoterms?

It is an incoterm, which requires the seller to arrange for transportation of goods to a specific named port.

In this case, the seller is responsible for delivering commodities, cleared for export loaded on board the shipping vessel.

Under CIF, the risk transfers from the seller to the buyer immediately the cargo is loaded on board.

This is before the main carriage takes place.

CIF also directs the seller to arrange and pay for insurance for commodities for carriage to the named port.

This incoterm, however, requires a minimum cover, which in most cases tends to be commercially unrealistic.

It is thus necessary to address level of cover elsewhere in the commercial agreement.

When should you use CIF when Importing from China?

 Insurance certificate

Insurance certificate

You should consider buying CIF when importing from China when you are new in international trade.

Most newbies often tend to purchase small cargo from time to time as they continue to learn various aspects of the trade.

CIF thus provides a more convenient shipping approach since you won’t need to deal with several freight details.

Handling freight may seem to be a bit complicated if you are a new importer.

It would thus be ideal for letting the supplier deliver the product to you.

You should also consider using CIF only when you are sipping a small volume since it is more cost-effective.

Are there Disadvantages of using CIF?

Yes albeit a few and they include the following;

  • It is relatively expensive – In essence, the seller determines all the factors including route, insurance costs, shipping company and transit time, among others. As a buyer, you are at the seller’s discretion as far as all aspects revolving around this incoterm is concerned.
  • Information discrepancy – In case something goes wrong with CIF shipment, it becomes difficult for the buyer to obtain accurate information. The reason here is as a buyer; you do not own the cargo until they get the delivery.
  • Inconvenient – In CIF shipment, it is the seller who provides the Importer Security Filing Document. Should the buyer delay or fail to file this document, the seller is likely to face severe fines and penalties.

What are the Limits of Freight Insurance?

  • It is relatively difficult to recover the full insured amount in case of a claim. In many cases, a portion of the amount is likely to be deducted for on different grounds.
  • If the activity involves personal interference, it becomes difficult for the insurance claim to be processed.
  • The bureaucracy and legal formalities involved are tiresome to follow hence making processing of claims quite lengthy.

Which Types of Shipping Insurance are there?

There are several types of shipping insurance policies based on different limitations and coverages. Some of the common ones include the following;

· Marine Cargo Insurance

It is the type, which covers your shipment transported via ocean and air freights.

It applies explicitly for international shipping.

It covers several claims such as damage as a result of bad weather, piracy, loading, and unloading, among many risks.

This type of shipping insurance can either be permanent or renewable.

For an infrequent trader, considering renewable marine cargo insurance makes commercial sense.

The renewable option is cheaper since it applies to one-time single voyages.

For the frequent shippers, permanent policy cover would be practical.

It determines the duration of time irrespective of shipments you’re shipping.

· Land Cargo Insurance

This is the type of shipping insurance policy, which covers your cargo when transported on land.

It covers your shipment when it is on board of a truck.

Additionally, it applies to a cargo transported or managed by a wide range of utility vehicles.

It is applicable mostly, for domestic coverage, which implies it is applicable within the specific country.

It covers risks such as theft and damage from the collision, among others.

What is the Cost of Freight Insurance?

It varies depending on a wide range of prevailing factors.

Majorly, the projected cost of freight insurance is often pegged on the type of insurance you are purchasing between single and open coverage.

However, the value of goods you are transporting is one of the critical components, which determine the cost of freight insurance.

The higher the value, the higher the cost of freight insurance.

Carrier’s loss history also influences the cost of freight insurance.

If your preferred carrier is fond of losing or damaging shipments, the cost will be a bit higher than otherwise.

And most importantly, the types of goods you are insuring, type of packaging, and shipping distance also determine the cost of the cover.

For instance, when insuring items such as electronics, mobile phones, and laptops, the cost of insurance is likely to comparatively high.

In contrast, if you are insuring commodities such as plastic materials and toys, the cost will be a bit low.

In a nutshell, there is no standard cost of freight insurance.

It is dependent on a wide range of factors.

Does Mode of Shipping from China affect the Cost of Insurance Certificate?

Absolutely yes!

For example, insurance cost is relatively high when shipping your products from China to your destination country via ocean freight.

In essence, ocean freight is subjected to various risks for an extended period.

By contrast, insurance cost for shipping goods via air freight is comparatively cheaper.

In most cases, the goods are not exposed to several risks in this case.

Also, the commodities get to the delivery destination faster than in ocean freight.

Who is the Policy Holder in Insurance Certificate?

It is the individual or entity appearing on the certificate whose goods are covered.

In this context, you can as well refer to the policyholder as the consignee or the buyer/importer.

On this document, you can determine the policyholder by looking at the details such as name, mailing address, contact information and operations they carry out.

What is the Validity Period for Insurance Certificate?

It refers to the duration, which the insurance cover is legitimate to compensate the claim should it arise.

The validity period often varies depending on different factors revolving around the cover.

The validity period of this document usually encompasses the time between the specific hour and date of policy inception and the hour and date it expires.

Do you need an Insurance Certificate when Shipping Small Volumes from China?

It depends on the specific types of goods and mode of shipping you are using from China.

It is also dependent on the value of the shipment you are transporting.

For instance, you need to assess the value of the shipment, and whether or not it is prone to risks such as damage or loss.

There are items such as electronics like laptops and mobile phones, which can be in small volume but with high value.

In essence, to determine the need for an insurance certificate when shipping small volumes, you have to consider various elements.

Who Issues Insurance Certificate for Exports/Imports?

The insurance company or insurance broker issues the insurance certificate.

This, however, is after assessing all the essential elements, which determine the value of the cover.

While at it, you have to ensure the documents contain the name and logo of the company.

The respective insurance officials should duly sign it.

How long does it take to get an Insurance Certificate?

It depends on the particular insurance company you are seeking the cover from.

Insurance companies have different timelines for issuing insurance certificates.

In most cases, however, you can get this certificate immediately after your submission and assessment of the necessary documents.

Some companies, however, would issue it after 24 hours and others up to two days.

Even so, the insurance certificate for freight should be issued within seven days.

Can you add Additional Insurance on your Insurance Certificate?

Yes!

Any ideal freight insurance policy should give you the option to include additional insurance cover.

However, the simplicity or complexity of attaining this depends on the insurance company.

How much does it Cost to Add Additional Insurance?

Adding additional cost varies among different types of policies and insurance companies.

In some companies, there is always a cost for blanket additional insurance endorsements.

In this case, you pay a flat rate fee to cover any cargo you contractually agree to include in the existing insurance.

In other instances, the insurer may choose that you pay for each additional cargo independently, based on the prevailing conditions.

Typically, the cost is not necessarily much, but you have to figure out the better option depending on your needs.

What other Shipping Documents do you need when Importing from China?

They are quite a number including the following;

Is Insurance Certificate Required for Customs Clearance of Imports?

Yes.

It is an important document required at the customs clearance department.

It is vital in the customs clearance process since it allows the authorities to confirm whether or not the selling price includes insurance.

It is necessary since it helps in finding assessable value, which determines the amount of payable import duty.

How does Insurance Certificate Work with Courier Shipping?

The consignee obtains this document from an insurance company, which covers the cargo in case of any damage or loss.

The freight forwarder or consignee contacts the insurance company in case of loss or damage of a consignment in transit.

The insurer launches an investigation to find out the cause and possibility of compensating the claim.

After the assessment and finding the relevant information, the insurer pays part of full of the claim depending on the evaluation report.

How do you Check the Authenticity of Insurance certificates?

Here are the tips to guide you in verifying the authenticity of insurance certificate;

Contact the insurance cover provider – You can reach out to the company via a website or toll-free lines to confirm whether or not the policy is genuine.

You can as well opt for sending emails as a way of cross-checking the details.

Ask for a receipt for the policy – Once you make the payment, insist on getting the receipt for the same. It should reflect your details aptly.

Check through policy comparison sites – It allows you to get the details of the insurance policy.

An aggregator of policy information encompasses information from all leading insurance companies.

Confirm the essential details – All vital details must be captured rightly on the policy.

Such information includes Insured Declared Value and deductibles, among others.

Use a QR code – Scan the document to verify the details. Scanning enables you to obtain relevant details of the policy instantly.

Therefore, ensure you have a QR code app on your smartphone.

For all your shipping needs from China, BanSar China is here to help you – contact us now.

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