There are many insurance policies available to businesses in trade. In this article, we have listed all the insurance policies you need to know in detail.
Doing business of any kind involves many risks. When it comes to international business, the risks tend to be higher and more serious. Because an international business means that you have to deal with international laws. But that is not the only issue. International business means that you might lack control over certain areas of business.
Import and export processes are one of them. During the trading process, many things might go wrong due to how complex the entire process can be. Since you will not be able to micro-manage everything, you need to rely on certain strategies or solutions. That’s where insurance policies come into play.
Insurance policies in exports allow you to mitigate risks as much as possible. Lowering the risks of doing business overseas, will allow you to grow your business and build a stronger network. Whether you are an exporter or an importer, knowing different types of insurance policies involved in trade can protect you against the risks and a possible loss. There are many insurance policies available to businesses that engage in international trade. In this article, we have listed all the insurance policies you need to know in detail. Let’s take a look.
Marine insurance is vital to managing the risk involved during the sea transportation processes. It does not only protect the vessels but also the cargo, assets and personnel it carries. Considering the risks involved in sea freight, marine insurance gains importance to minimize the loss as much as possible.
Marine insurance is important In the case of a vessel sinking or another destructive event taking place and damaging the cargo, causing delays or any other problem. In such an event, the marine insurance policyholder can file a claim with their insurance provider. After the claim is processed, the insurance must cover the loss in the amount that was specified. While this amount might change, the insurance typically covers three-quarters of the lost cargo’s value.
Sometimes marine insurance might not be enough to protect your cargo against the problems that might occur. Cargo insurance is another quite important insurance type that does not focus on the type of transportation but the cargo that is being carried. Cargo insurance is comprehensive because it protects the cargo throughout the process until it reaches the customer.
Therefore it covers the storage of products during transportation, as well as packaging, loading or unloading the goods, or even the transshipment of products. This includes incidents such as cargo not being secured properly by the transporters which cause damage to the products. In such a scenario, cargo insurance will cover the loss. This could be especially beneficial if you are using different modes of transport and working with a third-party transportation company.
Trade credit insurance is also known as credit insurance. It is the most popular type of insurance in terms of exports. It is often preferred because it protects the exporter against the risk of not being paid by the buyer. If the buyer is unable to pay the amount they owed, trade credit insurance covers up to 80% to 90% of the amount owed.
This allows the exporter to protect themselves in the case of unwanted surprises and allows them to continue their work without any delay. This also helps the exporter to do business with new customers without the fear of not being paid when the time is due. Therefore trade credit insurance is vital to protect your business against financial loss.
Political risk insurance comes into play especially when companies work with other companies that are from developing countries. Since the political atmosphere of such countries can be quite different and unexpected, this type of insurance protects companies against political events and risks. Political risks might include events such as the seizure of private property by the state, upheaval, cancellation of an import license and currency inconvertibility.
Political risk insurance often goes hand in hand with trade credit insurance to protect the company against a variety of risks. Therefore, when doing business with an overseas company, it might be wise to purchase political risk insurance in case of a political threat happening that would end up in financial losses. Political risk insurance might cover a wide range of political risks such as civil unrest, expropriation, not being able to convert currency, terrorism and war. With this insurance, a company can carry out its business activities in any given country without fear.
When engaging in international trade, foreign exchange management gains importance. Currencies might suffer from significant movements due to certain economic fluctuations. When the currencies are not stable, doing business with other countries becomes quite risky.
If the exchange rates change unexpectedly or significantly in a short period, companies run the risk of losing money. In such cases, currency insurance protects companies against the loss that might occur due to conversions.
Product liability insurance is crucial in case something goes wrong with an exported product. Products that were sold might turn out to be faulty. They may not comply with certain regulations within the destination country. Product liability insurance protects the exporter against such incidents and covers losses. In short, this type of insurance protects companies against the claims that the products sold were not working properly and caused some sort of harm.
However, it should be noted that this type of insurance only covers the losses as long as the exporters complied with all the laws and regulations. This means that exporters need to prove that the products they sold were unwittingly faulty. Once proven, product liability insurance often covers legal fees, medical costs of bodily injuries, illnesses and wrongful deaths, as well as damages to others’ property.
When engaging in international trade, businesses need to protect themselves against all kinds of losses. When unprepared for unexpected occurrences and risks involved in the process, the outcome might be detrimental for businesses.
Therefore, depending on the type of import or export processes a company is involved with, choosing the right insurance policies can protect them from losing money. Once a company purchased all the insurance policies it might need based on the risks involved, it can safely venture out into the world of international trade. It can focus on growing its business and expanding its international network.
Turkish Goods ensures that the entire export process runs smoothly. To import products safely without fear, you can contact Turkish Goods.