Insurance Certificate for Letter of Credit



Insurance Certificate for Letter of Credit :




Under the terms of a CIF contract, the beneficiary is obliged to arrange insurance and furnish the buyer with the appropriate insurance policy or certificate. The extent of coverage and risks should be agreed upon between the buyer and seller in their initial negotiations and be set out in the sales contract.


Since the topic of marine insurance is extremely specialized and with conditions varying from country to country, the services of a competent marine insurance broker are useful and well-advised.


Checklist


If the letter of credit calls for an insurance policy, an insurance certificate is not acceptable and the policy must be provided. Broker’s cover notes are not acceptable unless specifically allowed in the letter of credit.


If the insurance policy or certificate indicates that it is issued in duplicate, both copies must be presented.


Unless the amount to be insured is stipulated in the letter of credit, the amount should cover at least the CIF value plus 10 percent if invoiced in those terms. Otherwise, the amount should be for the greater of the draft amount or the total invoice value plus 10%.


The amount insured must be expressed in the same currency as the letter of credit.


The description of the goods insured must be consistent with that in the other documents although not necessarily identical.


The number of packages comprising the shipment and shipping marks and numbers must agree with those shown on the invoice and bill of lading.


The name of the carrying vessel, port of loading and port of discharge must agree with those shown on the bill of lading.


The insurance document must cover transshipment if transshipment is indicated on the bill of lading.


The insurance document must cover specifically those risks stipulated in the letter of credit. The “all risks” clause in the insurance document does not cover risks of war, which must be separately shown as covered, if required by the letter of credit.


Unless the letter of credit specifies to whom loss is to be payable, the insurance document must be endorsed by the party to whose order it is made so as to be in negotiable form.


The date of the insurance document should not be later than the date of shipment as shown by the bill of lading or other transport document. However, the insurance document may be dated after the date of shipment provided it evidences that cover is effective from date of dispatch ie., by way of “warehouse to warehouse” clause.


Any alterations or corrections to the insurance document must be initialed by the party signing the document.


The insurance document must be signed by an authorized person.


The foregoing are the most common documents usually called for in an export letter of credit. The following may also be asked for to satisfy government requirements or for the convenience of the buyer.




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