On this page
- Understand how export insurance can protect your business.
The risks of not insuring your export goods
As with any other type of business activity, all exporters should consider taking out insurance to cover risk and loss. Coverage is usually considerably different from domestic insurance so details need to be carefully checked.
There are three major risks in export: that goods are lost or damaged; that a buyer can’t (or won’t) pay; and that you become unable to fulfill the terms of a contract.
Types of risks covered by insurance
You will generally be advised and/or contractually required to take out export insurance in order to cover two broad categories of risk:
- Loss or damage of goods - Coverage protects you from loss of or damage to goods during transit. Responsibility for effecting insurance will be determined by the terms of the contract between seller and buyer and Incoterms are quite specific in this regard. The extent of cover will vary from contract to contract but CIF (cost+insurance+freight) value plus 10 per cent is often used as a guide to recover all costs in the event of complete loss.
- Default of buyer - You can obtain insurance against the risk of non-payment through the Australian Government’s Export Finance & Insurance Corporation (EFIC) or private insurers.
The following risks will usually be covered
- default by buyers
- buyers refusal to accept delivery
- buyer insolvency
- delivery affected by unforseen events
- war, hostilities, or civil disturbances
- government intervention.
The National Insurance Brokers Association of Australia and The Export Finance and Insurance Corporation offers more information on export insurance.
You will also need to be aware of the requirement to take out product liability insurance if your product may be deemed to cause damage or personal injury.