The international marine cargo insurance market offers 3 types of cargo insurance documents.
These are the insurance policy, certificate of insurance and declaration of insurance.
In contrast to the other two insurance document types, opening statements are not often used in day-to-day practice.
Therefore, knowing the details of insurance policies and insurance certificates is very important not only for exporters and importers but also for other foreign trade participants.
What is a cargo insurance policy?
An insurance policy is a legally binding written document issued by an insurance company or underwriter to the policyholder or the insured/insured.
Just like a bill of lading (which has the terms and conditions of carriage as a shipping document), an insurance policy defines the terms and conditions of an insurance contract and serves as legal evidence for an insurance agreement.
What is a cargo insurance certificate?
In some cases, exporters or importers do not like to insure each shipment individually, but they will sign the insurance for a certain period of time, such as 1 year.
During the insurance period, 1 year as shown in the example above, all goods of the exporter will be covered by cargo insurance. Term insurance contracts are also known as open-ended insurance.
If an exporter using open insurance requires insurance documents for a specific shipment, the insurance company issues a certificate of insurance.
Document content
Both the insurance policy and the insurance certificate should be issued by the insurance company or underwriter.
Both documents should state the same information, such as:
- Insurance terms and additional risks covered
- Premium amount
- Shipment details such as port of shipment, port of discharge, vessel name and voyage, cargo description.
- Insured currency
- Insurance amount
- Agent of insurance company at destination port
- Claims Procedure and Required Documents
What is the difference between an insurance policy and a certificate of insurance?
Probably the only difference between an insurance policy and a certificate of insurance occurs under a letter of credit payment. Under the rules of the letter of credit, an insurance policy may be accepted in lieu of a certificate of insurance or a statement under the cover. But the opposite is invalid.
So if you are not dealing with letters of credit, there is no difference between an insurance policy and a certificate of insurance.
If you are going to present the documents under the letter of credit then you should keep in mind that you can present the insurance policy and not the insurance certificate. But you cannot present a certificate of insurance instead of an insurance policy under a letter of credit.
