Certificate of Insurace

The Certificate of Insurance is a document indicating the type and amount of insurance coverage in force on a particular shipment. In documentary credit transaction, the certificate of insurance is used to assure the consignee that insurance is provided to cover the loss of or damage to the cargo while in transit.

A complete certificate of insurance should include the following elements:

1. The name of the insurance company,
2. Insurance policy number,
3. Description of the merchandise insured,
4. Points of origin and destination of the shipment. Coverage is indicated by the terms of sale. For example, for goods sold "FOB", coverage commences once the cargo is on board the vessel and continues until the consignee takes possession at either at the seaport or in-land port of destination,
5. Conditions of coverage, exclusions and deductible, if applicable,
6. A signature by the insurance carrier, underwriter or agent for the same,
7. Indication that the cover is effective at the latest from the date of loading of the goods on board a transport vessel or the taking in charge of the goods by the carrier as indicated by the transport document (bill of lading, etc),
8. Statement of the sum insured,
9. In a documentary letter of credit, specifies coverage for at least 110 percent of either: the CIF or CIP value of the shipment, if such can be determined from the various documents on their face, otherwise; the amount of payment, acceptable or negotiation specified in the documentary credit or; the gross amount of the commercial invoice;
10. Is presented as the sole original or if issued in more than one original, all the originals.

Cautions and Notes

In documentary credit transactions, the insurance currency shall be consistent with the currency of the documentary credit. Documentary credit transactions indicating CIF (Cost Insurance Freight) or CIP (Carriage and Insurance Paid) pricing should list an insurance certificate in their required documentations.

"Cover Notes" issued by insurance brokers (as opposed to insurance companies, underwriters, or their agents) are not accepted in letter of credit transactions unless authorised specifically by the credit.

In Case of Loss or Shortfall

The consignee should always note on the delivery document any damage or shortfall prior to signing for receipt of the goods. The consignee has the responsibility to make reasonable efforts to minimize loss. This includes steps to prevent further damage to the shipment.

Expenses incurred in such efforts are almost universally collectible under the insurance policy. Prompt notice of loss is essential. The original copy of the insurance certificate is a negotiable document and is required in the filing of a claim.

Copies of documents necessary to support an insurance claim includes the insurance policy or certificate, bill of lading, invoice, packing list and a surveyor's report (usually prepared by a claims agent).