OVERVIEW OF INSURANCE LIABILITY AND WHICH PARTY IS RESPONSIBLE FOR WHICH LEG OF THE SHIPMENT
Now, let's review the Terms
EXW
Ex Works (Ex Factory or W/H)
Risk transfers - At buyer’s disposal
Insurance:
Since the consignee is responsible for loss and damage from the point the consignment is placed on their disposal, Consignee is responsible for arranging insurance cover.
However, most of marine insurance policies, do not cover the phase where the consignment is loaded on Consignee’s Transport, but still on Consignor’s premises - even though risk has already passed onto the Consignee.
Therefore, it is important to verify that your insurance policy does in fact cover for all shipping legs and points for which you are responsible.
FCA
Free Carrier
Risk transfers - On Buyer’s Nominated Carrier
Insurance:
The Consignee is responsible for the main carriage, therefore, it is the Consignee’s responsibility to arrange marine insurance.
However, Marine insurance will cover consignment from the Carrier appointed by the Consignee, as that is the point where risk transfers.
The Consignee may therefore, need to agree with the shipper to arrange insurance cover for movement to the nominated Carrier.
FAS
Free Alongside Ship
Risk transfers - Alongside ship
Insurance:
The Consignee is responsible for arranging marine insurance to cover all risk of loss and damage from alongside ship, including main carriage, and up to place of delivery.
FOB
Free On Board
Risk transfers - On-board the vessel
Insurance:
Since all shipping responsibilities including freight, transfer to the consignee as soon as the goods move past the ship’s rail, the Consignee is therefore liable for arranging marine insurance coverage for the main carriage of the shipping journey.
Insurance companies mostly start coverage from the date the cargo was moved into the vessel, also referred to as the shipped on-board date.
CFR
Cost and Freight
Risk transfers - On-board the vessel
Insurance:
Since the Consignee shoulders the risk of loss and damage, as soon as the cargo is on-board the vessel, the consignee is therefore responsible for arranging marine insurance for the main carriage of the shipping journey.
CIF
Cost, Insurance and Freight
Risk transfers - On-board the vessel
Insurance:
Although risk of loss and damage passes onto consignee on-board the vessel, the Consignor is still responsible for arranging marine insurance coverage, for the main carriage of the shipping journey.
The level of insurance coverage required is however, Institute Cargo Clause (C), which is the most affordable option, as well as restrictive.
Thus, Consignees should verify that full cost of cargo is covered, rather than a portion thereof.
CPT
Carriage Paid To
Risk transfers - Alongside ship
Insurance:
The Consignee is responsible for arranging marine insurance during transit. CPT insurance cover is the same as it is for FCA.
Therefore, the consignee may still need to agree with the shipper to arrange insurance cover for movement to the Carrier.
CIP
Carriage & Insurance Paid To
Risk transfers - At Carrier
Insurance:
The Shipper is responsible for arranging marine insurance cover under Institute Cargo Clauses (A), which is rather a very expansive coverage and therefore, more expensive.
DAP
Delivered At Place
Risk transfers - At Named Place
Insurance:
Although not mandatory for Consignors to arrange for marine insurance cover, Shippers are likely to arrange insurance coverage, on behalf of their importing customers, to cover shipping activities they are responsible for.
DPU
Delivered At Place Unloaded
Risk transfers - At Named Place Unloaded
Insurance:
It is not mandatory for Consignors to arrange for marine insurance cover, but Shippers are likely to arrange insurance coverage, on behalf of their importing customers, to cover shipping activities they are responsible for.
DDP
Delivered Duty Paid
Risk transfers - At Named Place
Insurance:
Consignors are not obligated to arrange for marine insurance cover, but they are likely to arrange insurance coverage, on behalf of their importing customers, to cover shipping activities they are responsible for.
Conclusion
We cannot stress the issue of insurance hard enough here at SmooLink Forwarding (Pty) Ltd, since a lot can happen from point of departure and up to the place of delivery, as already touched on. Though not an insurance broker, nor are we affiliated with any insurance company in particular, SmooLink Forwarding (Pty) Ltd, can help you in arranging insurance cover, for shipments you have with us, acting purely as your representative and not the actual provider of the said insurance cover. Upon your specific instruction, to source insurance on your behalf, we will arrange insurance on your approval and file claims on your behalf, in the event of loss or damage, so you can focus on your core business.
SmooLink Forwarding, is committed to service excellence, where your convenience and peace of mind, is our paramount concern. Contact us today, to experience our freight forwarding excellence.
For a recap on the essence of acquiring an insurance cover for your cargo