Since multiple risks and uncertainties can impact the shipping and delivery process, all import/export businesses need to take out insurance policies and protect their goods. For instance, exporters shipping goods to a new country could face possible delays. These goods can also be physically damaged while moving from one location to another, creating major financial losses for the exporter. To avoid these situations, you must choose the right type of insurance. Take a look down below to see which insurance is the most appropriate for your company.
Choosing the Right Insurance
1. Cargo Insurance
The first and foremost type of insurance is cargo insurance. This method typically costs under 1% of the total value of the goods and is therefore very cost-effective. Moreover, if your cargo ever gets damaged during the shipment, the insurance firm will give you a full reimbursement. As a result, cargo insurance is suitable for small traders who export goods to other countries.
2. General Average Insurance
Another type of insurance that you could consider is the general average insurance, which can protect you from someone else’s cargo loss. For example, under the law of general average, if your goods are being transported by a ship or any other type of water vessel and it suffers from a breakdown, cargo owners are responsible for both the damage of other goods and the ship. However, under the general average insurance, you will not only be excused from paying for others but also be reimbursed for the late delivery of your goods. This type of insurance is especially ideal for new traders, as it holistically protects them.
3. Export Credit Risk Insurance
The third and last type of insurance is the export credit risk insurance. A lot of exporters deal with foreign buyers who purchase goods on credit. However, foreign buyers may sometimes refuse to pay for the goods due to political or commercial reasons. In this case, you could suffer from significant losses. To avoid these problems, you can opt for export credit risk insurance, which covers instances of non-payment and delayed payment. It is also mainly ideal for small and medium-sized enterprises (SMEs), and they can use this insurance to feel safer when taking on higher-risk foreign markets.
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