Damage to goods during transport from the port of dispatch to the point of destination can cause financial loss for the exporter. To protect against this, the exporter may purchase an insurance policy to cover physical damage to the goods.
What is export insurance?
Export Insurance is a type of policy that is meant for exporting goods or services. The purpose of this insurance is for the protection of goods, services or assets that you are planning to export.
What type of insurance do exporters need?
Some important insurance policies that exporter should take:
- Export Credit Insurance for Exporters (ECIE) – short term/ medium term/long term. ECIE can be turnover based or exposure based.
- ECIE – Pre-shipment and Post Shipment.
- Export Credit Insurance – Short term to be covered against bank guarantee.
There are two main reasons for insurance:
Legal and commercial. One of the legal liability risks that clearing and forwarding agents, carriers, port authorities, and customs authorities face is having limited protection. This means that if something goes wrong with the goods they are handling, they could be held responsible. Damages caused by events outside of their control or losses that occur despite taking reasonable precautions are not covered under their liability policy.
Marine insurance and cargo insurance are both terms used to describe a type of insurance that protects against loss or damage to goods while in transit. The main difference between the two is that marine insurance is used specifically when goods are shipped by sea, while cargo insurance can be used for any mode of transport, including air, land, and sea. However, both terms are often used interchangeably to describe the same thing.
Banks will typically require that your shipment is insured before they provide post-shipment financing. This is because if something happens to the goods during shipping and they are damaged or lost, the importer may refuse to accept the bill of exchange. This can cause a loss of profit, not just for the shipment itself, but for the entire business.
Anybody who exports or imports goods should be aware of the benefits of insuring their export goods and should make the most of the affordable cover offered by the export credit insurance. In today’s world, it is quite necessary to ensure that your business survives through the international market.
The main advantage of insuring your export goods
is that it provides you financial protection against losses incurred due to those worst case scenarios. Due to the nature of the business, there is a high probability that you will face a lot of risks. It is very difficult to predict how your cargo will be handled, especially in the case of overseas shipments. When you insure your export goods, it serves as a safety net just in case something unexpected happens to your goods. The insurance company will pay out when the goods are damaged, lost or stolen.
Why is export credit insurance important for exporters in international trade?
Export credit insurance is an insurance policy taken by the exporter. It is used as a protection against loss which may happen if the buyer fails to pay. It is important to understand that the payment made by the buyer is not under any guarantee or warranty by the government. The government or the Export Credit Guarantee Corporation of India (EGCGI) has nothing to do with the payment. Moreover, this will not guarantee that the exporter gets paid for the export made. Export credit insurance is also used for mitigating the risk associated with political uncertainties and war related threats. For example, if there is a political crisis in a foreign country, the risk associated with it will be borne by the insurance companies.
The main advantage of insuring your export goods
A major advantage of Export Credit Insurance is the export of goods and services is greatly secured. People are more confident in the purchasing of an item because they know that in the case of any mishaps; they are covered. This leads to a more confident buyer and seller and thus a more secure transaction. Some people may say that export credit insurance is nothing more than insurance and that it is not needed. But I would like to say that a lot of people are not able to export their goods or services because it is not safe for them to do so.
We hope this blog has been helpful in understanding benefits of Insurance in Export Industry. Well, If you are planning to enter the import and export business or looking for door-to-door service for importing from China to India or exporting from India to any part of the world, we provide a one stop solution for all your importing/exporting needs. Just contact us and we will help you.). At Sumark Global we made import & export easy and simple.