Unit 7 Cargo Transport Insurance,Introduction,2. Information,4. Reading Practice,3. Language Tips,1.Unit Points,5. Exercises,1.Unit Points & Focus,Contents,Objectives,Preview Case,1,2,3,Objectives,The insurance clause in the sales contract,The three basic insurance coverage and additional insurance coverage under C.I,The importance of cargo transport insurance,The different marine risks,After reading this unit, you will understand,The different marine losses,How to prepare the application form of insurance,Preview Case,A Chinese company exported some wheat to Denmark. The price term employed was CIF Copenhagen. During transshipment in India, part of the cargo was soaked by heavy rain. When the ship arrived at the port of destination, the importer claimed compensation from the insurance company. However, the insurance company refused to compensate claiming that damage caused by rain was not included in W.P.A. coverage.,Contents,7.1 Basic Concepts in Insurance,7.2 Different Risks,7.3 Different Losses,7.4 The Different Ocean Marine Insurance Coverage Under C.I.C.,7.5 Commencement and Termination of Different Insurance Coverage,7.6 Export and Import Insurance Practice and insurance documents,7.7 Insurance Claims,7.8 Insurance Clauses in a sales contract,7.1 Basic Concepts in Insurance,1.Insurer The insurer is the party that provides the insurance service and makes compensation in case of loss. For example, PICC, the Peoples Insurance Company of China, is the biggest insurer in China. Another term “ underwriter ” is also used to refer to the insurer. This term is originated from the Corporation of Lloyds, London, where the insurer was required to sign his name at the end of the insurance policy. 2.Insured The insured is the party who is insured against possible loss and to whom compensation is made. In international trade, the party which effects insurance is usually the insured. 3.Insurance policy The insurance policy is the contract concluded between the insurer and the insured. 4.Insured amount The insured amount is the amount of money the insurer agrees to cover the insured goods against loss. In other words, the insured amount is the upper limit on compensation payable to the insured in case of loss. In international trade, the insured amount is often the CIF value of the consignment plus 10%. The additional 10% compensates for the loss of profit expected from the transaction. 5.Premium The premium is the money paid to the insurer for the insurance service. The premium is always presented as a percentage of the insured amount.,Students Task Why is the insured amount generally based on the CIF value of the goods rather than the FOB value of the goods?,7.2 Different Risks,About 80% of the goods in international trade are transported by sea. In this unit, we focus on marine transport insurance. There are two main categories of risks as shown in the diagram below.,Natural calamity refers to natural disasters such as vile weather, tsunamis, earthquakes, volcanic eruptions, storms, lightning and so on. Fortuitous accidents are events happening to the vessel such as stranding, grounding, collision, ship sinking, fires, explosion, ship missing and so on. General extraneous risks are risks due to theft, rain, leakage, shortages, breakage, dampness, mildewing, heating, taint of odor, hooking and rusting. Special extraneous risks are risks such as on deck, war, strikes, failure of delivery, rejection, etc.,7.3 Different Losses,Losses caused during the transit of goods can be classified into total loss and partial loss. Total loss might be actual total loss or constructive total loss, while partial loss can be further divided into particular average and general average.,Actual total loss means the insured goods are totally damaged, or have been lost or found valueless upon arrival. Constructive total loss occurs when the actual loss of the insured goods is unavoidable, or when the ship or the consignment has to be abandoned because the cost of salvage or recovery will exceed the value of the ship and the consignment upon arrival. Particular average is the partial loss suffered by the party whose consignment is partially lost or damaged. When the loss or damage occurs, no cargo of other parties has to be sacrificed to save the voyage. General average is the partial loss resulting from a deliberate act of the ships master, such as throwing overboard all or part of the cargo to save the ship. In this case, all beneficial parties will share the loss of the specific consignor.,Case A ship was transporting cargo at sea, when suddenly heavy smoke was seen coming from the ships hold. Thinking that the cargo was on fire, a sailor turned on the fire hose and sprayed water on the cargo. Part of the cargo was soaked and damaged. However it turned out that the engine had given off the smoke and there was no fire at all. The sailor had been mistaken. In the above case, can the partia