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INSURANCE POLICY VS INSURANCE CERTIFICATE

By Mr Old Man
Posted on March 9, 2010
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QUERY FROM YOYO KENSHIN

I'm still a little confused. Is that Insurance policy an agreement between 2 sides with proper terms and conditions while Insurance Certificate is just a letter or a document that informs the insurance is now available?

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COMMENT FROM MR. OLD MAN

Dear Yoyo Kenshin,

Thanks for asking Mr. Old Man.

The insurance policy may be either a specific policy (voyage policy) or an open policy (blanket policy/floating policy).

A specific policy covers a particular shipment or one shipment only, whereas an open policy is issued once by the insurer under the contract to cover many shipments made by the exporter to different importers over a period of time (usually one year). Therefore, the exporter holding an open policy can not send that sole policy to all the importers. Instead, he will issue an insurance certificate to each shipment and that insurance certificate will bear the open policy number.

Please note that if the LC requires an insurance certificate, an insurance policy presented is acceptable, but if the LC requires an insurance policy, an insurance certificate presented is not acceptable unless the LC provides that an insurance certificate issued under an open policy is acceptable.

LC issued by banks in Vietnam would require insurance documents worded as follows: “Insurance Policy/Certificate in assignable form covering all risks …”. This means that either insurance policy or insurance certificate presented is acceptable.

Best regards,
Mr. Old Man (Nguyen Huu Duc) …

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12 Comments

12 Comments

  1. anonymous

    May 2, 2011 at 8:05 am

    Lena writes:Dear Mr.Old Man,I have a question relating the Seller’s obligation in terms of insurance in CIF, Incoterms 2000. Is it same the Seller's obligation in term of CIF such as Provision of goods,Licences, authorisations and formalities ,Contracts of carriage and insurance ,Division of costs ….Thanks for your help.Best regards,Lena

    Reply

  2. mroldmanvcb

    May 2, 2011 at 9:05 am

    I guess you mean the difference between CIF Incoterms 2010 and CIF Incoterms 2000.Basically, the seller's obligations under CIF Incoterms 2010 remain unchanged in comparison wih CIF Incoterms 2000 except for the point of transfer of risks. Under CIF Incoterms 2000, the point of transfer of risks from the seller to the buyer is the ship's rail at the port of shipment, whereas under CIF Incoterms 2010, the seller must bear all risks of losss or damage to the goods until and only when they have been loaded on board the ship. For FOB, CFR and CIF Incoterms 2010,the transfer of risks occurs from the moment the goods are on board the vessel, and not – as previously,once they cross the ship's rail. The concept of the ship's rail under Incoterms 2010 is "dead".

    Reply

  3. anonymous

    May 3, 2011 at 8:05 am

    Anonymous writes:Dear Mr Old Man,Thanks a lot for your explanation. Deu to I still not very clarify what is the Seller’s obligation in terms of insurance in CIF, Incoterms 2000. I found there are maybe ten of the seller's obiligation in terms if CIF , incoterms 2000 but I can't find obligation of the seller in terms of insurance in CIF, Incoterms 2000. My knowledge for insurance term is quite poor.Thanks for your helps again.Lena

    Reply

  4. anonymous

    October 15, 2013 at 6:10 pm

    Anonymous writes:Hi. You can find a blank Fillable CERTIFICATE OF LIABILITY INSURANCE here. http://goo.gl/1YzTXjYou can fill out the form, save it, fax it, and email it. Please feel free to use it.

    Reply

  5. anonymous

    November 4, 2013 at 10:11 pm

    Mr Eddie writes:I have a l/c issued by a vietnam bank that requires an insurance in Assignable form non-deductable and endorsed in blank. The following is printed on the bottom the insurance certficate. "UNDERWRITERS AGREE LOSSES, IF ANY SHALL BE PAYABLE TO THE ORDER OF _________________________ ON SURRENDER OF THIS CERTIFICATE". Based on this requirement should ASSURED be typed in underlined space provided?

    Reply

  6. mroldmanvcb

    November 5, 2013 at 10:11 am

    I think it's not necessary.

    Reply

  7. srigandaya

    December 11, 2013 at 10:12 am

    HI Old Man For FOB, CFR and CIF Incoterms 2010,the transfer of risks occurs from the moment the goods are on board the vessel,this is a part of your early conversation and i am confused??let say my supplier in china agreed CIF Melbourne his insurance liability remain valid until shipment arrived to the Melbourne Port thanks

    Reply

  8. mroldmanvcb

    December 11, 2013 at 2:12 pm

    Hi,Unlike Incoterms 2000 FOB, CFR and CIF rules, which provided that the responsibility for costs and the transfer of risks of loss or damage to the goods passed to the buyer once the goods PASSED THE SHIP’S RAILl at the named port of shipment, Incoterms 2010 of FOB, CFR and CIF provides that the transfer occurs once THE GOODS ARE ON BOARD the vessel nominated by the buyer at the named port of shipment.You need to differentiate the transfer of risk point with insurance obligation (obligation to buy insurance).Best regards/Mr. Old Man

    Reply

  9. Anh Nguyễn

    April 8, 2015 at 4:21 pm

    “Please note that if the LC requires an insurance certificate, an insurance policy presented is acceptable, but if the LC requires an insurance policy, an insurance certificate presented is not acceptable unless the LC provides that an insurance certificate issued under an open policy is acceptable”
    Pls give me your foundation that your comment bases on. As far as I understand, UCP 600 just mention if the LC requires an insurance certificate, an insurance policy presented is acceptable but silent to the scenario ‘if the LC requires an insurance policy, an insurance certificate presented is not acceptable’
    .
    Pls help me clarify this matter. Thank you very much for spending your precious time.

    Reply

    • mroldman

      April 9, 2015 at 5:46 am

      Just imagine that an insurance policy is a mother and that an insurance certificate is a baby or the child. When the mother is required to be present, the mother should be present; her baby cannot represent her. However, the mother can be present as representative of the child.
      Similarly, when an insurance policy is required, then insurance policy must be presented, no other document, including insurance certificate, is acceptable. However, an insurance policy can be acceptable in case an insurance certificate is required.
      You can find this truth in CDCS materials “Guide to Documentary Credit” Fourth Edition (Chapter 7- Insurance documents) and in ICC Opinions.

      Reply

      • Anh Nguyễn

        April 9, 2015 at 11:21 am

        thank you so much for your explanation. Please do me one more favor, give me the full details of ICC opinions as stated.

        Reply

        • mroldman

          April 9, 2015 at 8:56 pm

          Hi,
          I would like to use the practice of insurance industry to explain the reason why an insurance policy is acceptable in lieu of an insurance certificate but not vice versa.

          An insurance policy is an insurance contract including terms and conditions based on which the insured or the assignee can claim compensation from the insurer, whereas an insurance certificate is evidence that the goods has been covered under a master policy. Therefore, the insured or the assignee who lodges a claim against the insurance company may be required to produce both the insurance certificate and the insurance policy.

          UCP 600 sub-article 28 (d) states: “An insurance policy is acceptable in lieu of an insurance certificate or a declaration under an open cover. King -tak Fung, a banking partner of DLA Piper specializing in international trade law and practice, suggested ICC in his article “UCP 600 and insurance documents” published in DCInsight Vol. 14 No. 4 October – December 2008 that ICC should add “but not vice versa” at the end of sub-article 28 (d) to reflect this practice.
          Gary Collyer in his “Guide to Documentary Credit” Fourth Edition” (Chapter 7- Insurance documents) also shared the same view as King-tak Fung’s.
          Kind regards,
          Mr. Old Man

          P/s: I do not have time to look up ICC’s related opinions, but believe me that this truth has been known to all document checkers.

          Reply

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