Starting a foreign trade business is a daunting task. So, whenever you start an import-export business, you should make sure that you do not keep your business uninsured. Unexpected risks might occur in every business, and such risks cannot be predicted. However, we can take protection and try to avoid them. This is where import-export insurance comes into action. If you have an import-export business, you must have import-export insurance to cover your business.
Having an export business offers exporters peace of mind because their businesses will be protected against unpredictable risks in the upcoming future.
There are various types of insurance available for trade businesses. You must know about them thoroughly to choose the right insurance policy that will make a very significant contribution to keeping your international earnings and assets safe and secured.
Types of Import-Export Insurance
There are different types of import-export insurance available for the foreign trade businesses. As an exporter, you must be able to figure out the type of insurance that perfectly fits-in for your business to protect it from all the unwanted risks.
Export Credit Insurance
This is considered to be the most popular export insurance. A lot of exporters also know this as trade credit insurance. Export credit insurance guarantees exporters that they are not required to stop themselves from enjoying the various advantages due to the threat of risk of failure arising from foreign trades. Also known as trade credit insurance, this type of import-export business insurance protects your cash flow so that you still get paid even if your consumer defaults.
This type of insurance is suitable for businesses that extend credit to an international importer. Export credit insurance involves the risk of the buyers becoming insolvent. Moreover, this type of insurance can provide great returns of 80 to 90% of the stuff that was owned. The advantages of credit insurance are that it gives the exporter comfort in knowing that if something happens to the potential buyer, they will not risk the business.
Marine Insurance
You might be wondering what marine insurance is. It is the type of export insurance which refers to a contract of indemnity.
Marine insurance acts as a symbol of assurity that the goods or products dispatched from the exported country to the specific foreign market are under insurance. It is the type of insurance that covers the damage of a cargo, ships, terminals, and all the other means through which goods are being exported from one location to another.
Marine insurance has started to play a vital role in the global level of imports and exports. Also, both exporter and importer are required to make payments under this type of insurance. You must also know that the subject matter of this type of import-export insurance moves way further rather than just being limited to the contractual obligations.
Product Liability Insurance
Product liability insurance refers to the type of import-export insurance which enables the traders to protect their business from claims that their goods or services have caused some injury or damage to someone else’s belongings.
This type of import-export insurance appears to be the best choice for a trade business because if your business is not insuranced for product liability then you might face such situations where you will need to pay for expensive general liability claims if any kind of product defect occurs.
A product liability insurance covers three important things:
- Consumer’s medical cost if any injury happens due to your product or service
- All the legal fees needed to defend and protect your trade business
- To deal with various settlements and judgements passed against your import-export business.
Political Risk Insurance
This is the type of import-export insurance that acts as an element for the trade businesses to eliminate various risks that might occur due to adverse actions by the government of the country. It enables exporters to create a more stable business environment.
Political risk insurance covers the risks that may result from various political tension in the country such as war, uprisings, protests, etc. It also involves certain factors that could invalidate your domestic company claim. It also protects from the threat of financial losses which might occur due to various unexepected political events.
Conclusion
Knowing about what type of insurance is important for your import-export business is very essential. Before starting an import-export business, you should be aware of its various aspects starting from types of insurance covers to various government schemes initiated to boost Indian exports in the foreign markets. Also, you must know that importing and exporting from a country to another country requires an official certificate. It is the chartered engineer certificate. This is a very vital requirement of Indian customs. Therefore, as an exporter, you should have great knowledge about all such things. Then only you will be able to make your import-export business reach its heights.