3 TYPES OF INSURANCE
YOU NEED FOR YOUR
GET THE LOWDOWN ON THE SPECIFIC TYPES OF INSURANCE YOU NEED TO
PROTECT YOUR IMPORT/EXPORT BUSINESS.
The following excerpt is from the Staff of Entrepreneur’s book Start
Your Own Import/Export Business. Buy it now from Amazon | Barnes
& Noble | IndieBound
You’ll need insurance for many aspects of your import/export
business, from employees to cargo. Read on to find out more.
Related: how did you get a wholesale retail trade WRT license
INSURING YOUR EMPLOYEES
Once you hire employees, you’ll need to think about caring for them.
Workers’ compensation insurance laws vary among states; check with your
insurance agent for details in your area. Workers’ comp covers you for any
illness or injury your employees might incur on the job. If your employees
work in your home office and get injured there, your homeowners’
insurance may refuse to pay on the grounds that it’s actually a workers’
comp case. Check with your insurance agent regarding what you need,
then make an informed decision.
EXPORT CREDIT RISK INSURANCE
Thanks to the Export-Import Bank of the United States, you can purchase
several types of export credit risk insurance designed specifically for the
newbie exporter and small- to mid-sized enterprises.
These policies protect you in the event that your foreign buyer decides not
to pay you for either commercial or political reasons.
The Ex-Im Bank (and the United States) hope policies such as these will
encourage both you and your financial institution to take on higher-risk
YOUR MENU OPTIONS AT EX-IM ARE THE
Small-business policy. This multi buyer policy requires that you insure all your export
credit sales with Ex-Im; it’s designed to free you from the “first-loss” deductible of most
To take advantage, you must have an export credit sales volume of less than $5 million
in the past three years before application, your company must qualify as a small
business under the Small Business Administration’s definition of the term and you must
have been in business at least one year with a positive net worth.
How do you find out if you qualify? Call the SBA’s Office of Size Standards at (800) 827-
5722, or check its website.
Umbrella policy. This policy boasts the same coverage and eligibility as the
small-business policy above, but it allows you as an export management
company or export trading company to act as an administrator or
intermediary between Ex-Im and your clients.
Short-term single-buyer policy. This one, which covers a single or repetitive
sale, is for the exporter who doesn’t want to insure everything with Ex-Im.
A special reduced premium is offered to small businesses.
When it comes to cargo insurance, to mangle a well-known advertising
maxim, “Don’t let your merchandise leave home without it.” The cost of the
insurance usually runs about 1 percent of the insured value, although this
varies with the type of goods and method of shipping.
Related: how to get a business license (Import/Export, WRT, SOCO, SST)
WHAT DO YOU GET FOR YOUR MONEY?
Peace of mind, for one thing, as with all insurance. And, in the event of a cargo
misadventure, your insurance coverage should include enough to repay you for not only
lost or damaged products but for your extra time and trouble and those lost profits.
You’ll want to purchase all-risk insurance, which covers your cargo against everything
except man’s inhumanity to man -- war, strikes, riots and civil commotion -- and inherent
vice in the cargo. What is vice, you ask?
It refers to any sort of plague or pestilence that might attack your cargo, such as boll
weevils in those gorgeous cotton blankets or E. coli on your Texas steaks.
You might also want to consider general average insurance. This
protects you in the event of someone else’s cargo loss. Say the ship
carrying your containers runs afoul of stormy weather.
The captain decides to jettison a portion of the cargo to save the rest,
and they dump somebody else’s stuff into the briny deep.
Fine, you say. Not quite. According to maritime law, even though your
merchandise has made it to port safe and sound, you can’t take
possession until you’ve paid for your share of the loss.
Let’s look at another scenario. Say the other party in your transaction
has purchased insurance -- for example, the exporter who’s shipping
to you CIF (cost, insurance and freight) but you’ve got a funny feeling
that their coverage isn’t too reliable.
Not to worry. You can purchase a contingent policy, which is about
half the price of regular insurance and will serve as backup insurance
in the event of a catastrophe.
As a newbie trader, your best bet will be to purchase insurance
through your freight forwarder, who has a blanket policy, or directly
from the air carrier.
As you grow, you may wish to purchase a blanket policy of your own,
which will cover you for everything you ship over the course of a year.
AVOIDING INSURANCE CLAIMS
Out on the high seas, your cargo may be subjected to rough and stormy weather. On the
docks, it can be equally buffeted about by tough longshoremen. What can you do to help
ensure your cargo doesn’t become a marine insurance claim?
1. Pack with dock loading and unloading procedures in mind. Your cargo may be slung
around (or skewered) by anything from a forklift to a sling or net, and then, if it survives
that, left outdoors to rot.
Often, cargo is “stored” on port decks or out on airplane cargo tarmacs, without any
covering. If you’re unfamiliar with overseas port operations and don’t have the right
packaging, you can lose cargo.
2. Pack to expect Mother Nature’s worst. Container loads can shift during
heavy seas and storms. Someone else’s cargo can smash into yours -- or
A sea voyage may be good for a human’s health, but it can be murder on
merchandise. Think heat and humidity, salt air (which is incredibly
corrosive), rain and sea spray.
When any or all of this gets into your containers, you can end up with rust,
blistering, mold, mildew and moisture damage.
3. Pack to expect human nature’s worst. Some people just can’t resist
somebody else’s goods. Theft can be a problem, especially when
containers are left on the docks for a long time.
With all these potential disasters in mind, pack smart. Use adequate
packaging materials; make sure your merchandise is cushioned against
blows. Waterproof everything possible.
Have package exteriors shrink-wrapped. Use waterproof lining on
interiors. Coat exposed metal parts on machinery, for example, with
grease or some other rust arrester. Use heavy strapping and seals.
Discourage theft by eliminating trademarks or content descriptions on