Principles of Cargo (Marine) Insurance (Part 1)
The cargo (marine) insurance works on the principles of insurable interest, utmost good faith, and indemnity.
Insurable Interest
When the goods are lost or damaged and the owner of the goods (i.e., the title holder in the goods) suffers a loss, fails to realize an expected profit, or incurs liability from the loss or damage, the owner (the title holder) is deemed to have an insurable interest in the goods.
When the exporter delivers the goods, the insurable interest in such goods transfers at the point and time where the risk shifts from the exporter to the importer, as determined by the international commercial terms used. For example, the point and time where the risk shifts in:
CIF
(Cost, Insurance and Freight to the named port of destination) —
the point the risk shifts is on board the ship at the named port of loading, as such the insurable interest transfers from the exporter to the importer at the time the goods pass over the ship’s rail.
CIP
(Carriage and Insurance Paid To the named place of destination) —
the point the risk shifts is at the depot in the country of shipment, as such the insurable interest transfers from the exporter to the importer at the time the goods are loaded on truck or container, rail car, or airplane (or goods placed in the custody of an air carrier) at the named point of departure.
The time the insurable interest transfers from the exporter to the importer is, technically, the time the exporter endorses the specific policy or the insurance certificate to the importer, as the case may be.
The insurance certificate bears the open policy number of the exporter and, like in a specific policy, the claim agent at port of destination and that claim payable at destination are also indicated.
The importer relies on the specific policy or the insurance certificate and the supporting claims documents as proof that the goods have been insured and that he/she has the insurable interest in the goods when filing for insurance claims against loss or damage.
In the trade terms DDU and DDP, the exporter is responsible for the risks up to the delivery of goods to the final point at destination (the project site or importer’s premises usually), as such the insurable interest in the goods does not transfer from the exporter to the importer in the shipment.
Some countries may require that the import and/or export shipments be insured with their national insurance companies.
Source: resources.alibaba.com