In the freight industry, poorly organized documentation can have a significant negative impact on the shipment of goods and increase shipping risks, costs, time and fines. Now more than ever, trucking companies are moving towards a paperless approach to document management to achieve greater efficiency and initiative and reduce risk.
Typically, large shipping companies have to deal with hundreds of documents every day for customs clearance and delivery, from bills of lading, commercial invoices and certificates of origin to cargo insurance certificates, export licenses and packing lists. If that wasn't complicated enough, shipping companies also have to deal with a multitude of contacts, from trade and logistics companies to various international agencies and authorities.
How does a certificate of insurance affect your claim?
A certificate of insurance actually grants insurance rights to another party, someone other than the purchaser of the insurance. Regarding filing a claim, it is similar to handing over a signed blank check to the other party. In the case of a letter of credit, the right to make a claim is vested in the bank providing the letter of credit. However, for exports, the purchaser of the goods is entitled to a claim.
Ultimately, this means that when a claim occurs, the claim will be paid to the assignee of the insurance certificate, not the policyholder. However, the claim will be credited to the policyholder's claims history.
Customers do not need proof of insurance if all shipments are done using a letter of credit. Instead, the bank can be named as the lender's loss payee on the policy.
The importance of managing cargo insurance certificates
Cargo insurance certificates are one of the most important documents in the shipping industry as they carry the greatest risks inherent in them. A cargo insurance certificate is a document that indicates the type and amount of insurance coverage that is valid for a given item. It is used to assure the consignee that insurance is provided to cover loss or damage to the goods in transit.
Certificates of insurance typically include the following information:
- Conditions of Insurance Coverage
- Transport information
- Additional/Special Coverage Conditions
- Instructions or Actions to Take in the Case of Loss or Damage of Goods
- Billing agent contact information
- LIABILITY OF CARRIER, TRUSTEE OR OTHER THIRD PARTIES
Alternatives to Certificates of Insurance
If all you need is proof that you have insurance, a letter of insurance can be issued for this purpose. In fact, these letters can be issued as general proof of insurance or to confirm that a single shipment complies with the policy.
Here are some examples of situations where a letter of insurance is sufficient:
- Carriers often require importers and exporters to certify that they have insurance before waiving insurance premiums.
- Clients of importers/exporters want to be sure they have an insurance policy if something goes wrong with their goods. This is typically the case if the policyholder pays the premium in the sales agreement with the importer/exporter.
If you are not expressly required to provide proof of insurance, then you may only need a letter of insurance. If your insurance provider asks if you need proof of insurance, don't say "just to be safe." This request often results in wasted time and money.
