Cargo insurance rating
Cargo insurance basis of rating refers to the factors that insurance companies consider when calculating the premium for a cargo insurance policy. These factors can be broadly divided into two categories:
- Cargo-related factors: These factors include the type of cargo being insured, its value, its packaging, and the route it will be taking.
- Transit-related factors: These factors include the mode of transportation, the duration of the journey, and the political and economic stability of the countries involved.
In addition to these general factors, insurance companies may also consider other specific factors, such as the shipper’s claims history and the underwriter’s own experience with similar risks.
The most common basis of rating for cargo insurance is the CIF + 10% basis. This means that the premium is calculated based on the cost, insurance, and freight (CIF) value of the cargo, plus an additional 10%. The CIF value is the total cost of the cargo, plus the cost of insurance and freight to the port of destination.
Other common bases of rating include:
- Agreed value: Under this basis of rating, the insured and the insurer agree on a value for the cargo before the policy is issued. This value is used to calculate the premium and to settle any claims that may arise. 2 Invoice value: Under this basis of rating, the premium is calculated based on the invoice value of the cargo. This is the value of the cargo as stated on the invoice from the seller to the buyer. 3 Market value: Under this basis of rating, the premium is calculated based on the market value of the cargo at the time of the loss. This is the value that the cargo could be sold for on the open market at that time.
The basis of rating that is used will vary depending on the specific cargo and the insurance company’s underwriting guidelines.
Example:
A company is shipping a container of smartphones from China to the United States. The CIF value of the shipment is $1 million. The insurance company agrees to insure the shipment on an agreed value basis. The premium rate is 0.5%. The premium for the policy would be calculated as follows:
Premium = Agreed value x Premium rate
Premium = $1,000,000 x 0.5%
Premium = $5,000
The company would pay a premium of $5,000 to insure the shipment for its agreed value of $1 million.
It is important to note that cargo insurance premiums can vary widely depending on the factors mentioned above. It is therefore important to compare quotes from multiple insurance companies before purchasing a policy.