Cargo Insurance under CFR: How Do I Cover The Final Leg of Delivery?

When it comes to cargo insurance, it’s important to know the difference between CIF and CFR incoterms. Importers and exporters must be aware that cargo insurance doesn’t automatically provide coverage on a warehouse-to-warehouse basis. The terms of sale between the buyer and seller determine the party at risk during each stage of transit and who is responsible for arranging insurance.

Let’s take CIF (Cost, Insurance, and Freight) as an example. When goods are purchased from overseas on CIF terms, the purchase price of the goods includes cargo insurance. However, it’s crucial to note that the insurance cover may end at the final port or airport in Australia and might not extend to cover the overland trip to the final destination. This depends on the terms of sale mentioned on the commercial invoice or agreed upon by the shipper and supplier.

Buyers who opt for CIF terms must clarify the scope and extent of the insurance coverage provided. It’s also in the best interest of freight forwarders to ensure that the coverage is adequate and suitable, as buyers often turn to them when issues arise. While suppliers are obligated to arrange insurance for goods imported under CIF terms, they are only legally required to provide a minimum level of cover. This minimal coverage typically protects against major perils such as fire, explosion, and grounding or sinking of the carrying vessel.

Can I Insure Just the Final Leg of the Journey?

One of the common concerns regarding CIF imports is how to insure goods for the final overland leg of the journey within Australia. If this trip isn’t covered under the agreed CIF terms, obtaining insurance on full all-risk conditions for this stage is rarely possible. Damaged goods are usually discovered upon delivery, making it nearly impossible for insurers to determine when the loss or damage occurred. For this reason, insurance companies only want to cover products for the entire duration of their journey.

What Can I Do To Fully Insure My Goods Then?

Apart from verifying the extent of coverage in a CIF transaction, the best approach for buyers is to import goods on a different incoterm, such as CFR, CPT, FAS, FCA, FOB or better yet, EXW – which gives the importer the most control over their shipment. Under any of these terms, the importer is responsible for arranging their own insurance. This allows the importer to select a local insurer and ensure that the terms, conditions, and sum insureds are suitable, providing them with greater peace of mind.

Arranging Cargo Insurance Is Easier Than You Think

Letting your freight forwarder arrange your ocean cargo insurance is the most convenient way to safeguard your cargo. This is especially true when you have infrequent shipments and want to avoid minimum premiums usually required by insurance companies for issuing open policies, or when providing insurance on individual shipments as they occur.

They can also recommend the most adequate coverage to fit your specific needs on a cost that is based upon your cargo’s exposure.

Is It Worth It Paying Extra For Cargo Insurance?

When goods are insured during transport, whether it be by land, air or sea; it means that if the cargo is damaged, stolen or lost during transit it will be refunded or replaced to whichever party held the “technical” ownership.

For instance, the receiver of the shipment may not claim it on their inventory until it is actually received in which case the shipper still holds ownership. Should the insured cargo be damaged, the shipper will receive the benefits of the insurance for their goods and the purchaser will be issued a refund. Having the cargo insured is a win-win for both parties. The right policy can also cover you against General Average costs – which is when both the vessel owners and cargo owners have to pay for a general loss, such as a vessel that caught on fire and sank down with all goods in it, for example.

Always Ask For an Obligation-free Insurance Quote

Still unsure of which insurance policy is the best for you or whether it is worth insuring your goods at all?

Ask your freight forwarder for an obligation-free marine insurance quote and weigh up the costs vs the potential risks to make the right decision for your business.

Our experienced staff can provide all information you need to facilitate your decision-making process and bring your goods with peace of mind.

or call us on 1300 227 461