FAQ-Answers

What are INCOTERMS, and why are they important for Marine Cargo Insurance?

If you receive goods from abroad, or ship goods overseas, you will encounter different INCOTERMS. This abbreviation stands for International Commercial Terms.These are a set of rules which define:

1. Duties of buyers and sellers to each other. 2. Who takes care of shipping insurance, licenses, and permissions. 3. Who arranges the transport, and until which point. 4. The point when costs and risks pass from the seller to the buyer. Knowing different INCOTERMS is important, because it will impact the type of shipping insurance you will need to buy for both goods you ship AND receive.

Common INCOTERMS are:
1. Cost, Insurance, Freight (CIF) – Sellers must pay for insurance until goods reach their port of destination. a. If you’re the seller: you’ll need to protect your goods with Marine Cargo Insurance. b. If you’re the buyer: you don’t need to buy insurance.

2. Cost and Freight (CFR)
– Buyers must pay for insurance once goods are loaded onto the ship, and until they reach their port of destination.
a. If you’re the seller: you don’t need to buy insurance.
b. If you’re the buyer: you’ll need to protect your goods with Marine Cargo Insurance.

2. Free On Board (FOB)
– Sellers must pay for insurance until goods are loaded onto the ship. Buyers must then pay for insurance until goods reach their port of destination.
a. If you’re the seller: you’ll need to protect your goods with Marine Cargo Insurance.
b. If you’re the buyer: you’ll need to protect your goods with Marine Cargo Insurance.