Insurance Claim Process

(1) the amount of insurance is the actual amount insured by the insured against the insured object, which is the basis for the insurer to assume the insurance liability and to collect the premium. The insured amount is the maximum amount of the insurer's compensation when the loss of insurance goods is within the scope of the insurance liability. Therefore, the insured should declare the insurance amount to the insurer when he insured the cargo insurance. The sum of insurance should be equal to the value of insurance in principle, but in fact, there are often inconsistencies. Benefits The same amount of insurance value is called Full Insurance. The amount of insurance declared by the insured is less than the insured value, that is, UnderInsurance. In this case, when the insurance goods lose, the insurer shall bear the liability of compensation according to the proportion of the sum insured to the insured value. In this regard, the Maritime Code of China is specifically stipulated in the 238th clause. The amount of insurance declared by the insured is greater than the insured value, that is, excess insurance (OverInsurance). In the case of indefinite insurance, the excess part is usually invalid, and the insurer only pays according to the insurance value.

The amount of insurance for international trade and cargo insurance is generally determined on the basis of invoice value. From the buyer's import cost, excluding the price of imported goods, freight and insurance premium must also be included, that is, the value of CIF is the insurance amount. However, when the goods are damaged, the operating expenses paid by the insured, such as the opening fee, the cable charge, the interest on loan, the tax and so on, and the Anticipated Profit which can be obtained, still can not be compensated from the insurer. Therefore, insurance laws and international trade practices in other countries generally stipulate that the sum of insurance of import and export cargo insurance can be appropriately added on the basis of CIF price.

The issue of additional insurance is stipulated in the uniform customs and Practice for Documentary Credits (International Chamber of Commerce 500 publication) and Incoterms (1990 Revision). The former stipulates that the minimum insurance amount is "the sum of CIF or CIP of goods plus 10%"; the latter stipulates that the minimum amount is "the price stipulated in the contract, plus 10%". According to the latter regulation, the insurance amount may be higher than the CIF price plus 10%.

For example, if the trade terms used in the sales contract are CIF The amount of insurance is not increased by 10% on the basis of "cost, freight and insurance premiums", but on the basis of "cost, freight, insurance and commission" plus 10%. Of course, the insurance premium rate of 10% is not static. The insurer and the insured can agree on different rates of increase according to the difference between the prices of different goods, different regions and the local market price, the different operating costs and the expected profit level. In China's export business, the sum of insurance is generally calculated by CIF plus 10%. If a foreign businessman asks to increase the insurance premium to 20% or 30%, the premium difference should be borne by foreign buyers. At the same time, when the foreign demand rate exceeds 30%, the insurance company should be first approved by the insurance company, and can not accept it when signing the trade contract, so as to prevent the following bad situations due to the excessive premium and the excessive insurance amount.

1. when the market price goes down, a bad businessman deliberately creates insurance against the loss of the goods.

2. as a result of Benefits When the insured goods are at risk, the general businessman may not take the initiative to take measures to prevent or reduce the loss.

3. the excessively high rate of addition can sometimes result in insurers refusing to cover insurance or substantially increasing premiums.

The sum of insurance is calculated as follows: insurance amount = CIF price ((10)), for example, CIF price is $105, plus rate is 10%:
The sum insured is 105 x (10 10%) = 115.5 (US $).

Taking the price of CIF as the basis for calculating the amount of insurance, this indicates that not only the goods themselves, but also the freight and insurance premiums are added together as insurance targets. Therefore, if the external quotation is CFR, and the other party asks for a change of CIF, or under the CFR contract, the seller can apply for insurance on behalf of the buyer, and it can not be calculated directly on the basis of the CFR price plus the premium. CFR The price is converted into CIF plus the sum insured. When the price of CFR is converted into CIF price, the following formula should be used:

(two) calculation formula of premium

The premium payable by the insured or the insured is calculated on the basis of the insured amount of the insured goods at a certain premium rate. The formula is: premium = insurance amount * premium rate. In general, foreign trade letters of credit require that insurance be added after the CIF price is added, and the above form can be changed to:
Premium =CIF price * (1+ insurance premium rate) * Premium rate.

In actual business, the insurance premium rate established by insurers is not an absolute accounting standard. With the change of supply and demand in international insurance market and market competition, the actual rate is changing frequently. As to the situation of the insured, it is customary to give different discounts to the quantity insured. In addition, in most countries, most insurance business is handled through brokers or agents, and the insurer needs to pay a certain commission or agency fee, which is also considered as a factor when the insurer determines the actual rate. Therefore, in the actual business, the determination of premium should be based on the final calculation of the insurance company.