Incoterms and insurance

Understand Incoterms to ensure shipments are covered

Incoterms, which stands for International Commercial Terms, need to be understood by all involved in buying and selling goods because they set up responsibilities of the buyer and seller. 

These terms generally are updated every ten years to reflect changes in the international trade system. Several changes have been made in Incoterms 2020, which means your insured's cargo could be at risk if you aren't familiar with the changes in shipping terminology and point-of-risk transfer.

A few common areas of confusion include:

  • Seller responsibility. Unless the seller has been paid for the product prior to shipment, the seller has an insurable interest. 
  • Negotiable insurance terms. Insurance is an obligation under CIP and CIF Incoterms, where the seller is required to purchase coverage. All other Incoterms require the buyer and seller to clarify insurance placement, terms and conditions.
  • Cargo exposure. Under the General Average rule, all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. In other words, even if your cargo is not damaged during transit, you could still sustain a loss. (Marine cargo/transit and stock throughput policies provide coverage for General Average).

Download our Incoterms 2020 guide to keep on hand when determining shipping-related insurance needs.

You can also trust Sentinel Marine Underwriters to navigate the terminology and dive into the details. As experts in the marine cargo space, we know what to look for and what questions to ask. We also offer "all risks" terms, securing against any named-peril surprises.