Insurance And Cargo

Question from Mr. Abdul Majid, Pakistan:

Is it important to pay insurance for export of rice ?
I believe you are looking at the point of a seller or exporter, and whether or not a seller should take up cargo insurance when exporting rice. I would rather share an open ended comment.
One of the most important aspects on which the Insurance works is called “insurable interest”. In layman term, it means you will either benefit financially from their safe arrival at the point of delivery OR you will lose out in the event of loss, delay or damage. Keyword here is “losing out in the event of loss, delay or damage”. The events leading to loss, delay or damage to the goods are uncertain, they may or may not happen. Mostly are out of our control, like fire, war, accident, negligent, act of God, riot, theft, default, perils, etc. The fact remains, the possibility of any of these factors to happen is ever present.
The Hague-Visby Rules, article 4, clearly indicates disclaimer on the part of the carrier with regard to the loss of, damage or delayed to the goods. The liability of the carrier is very limited. It simply means, in the event of mishap, you would not be able to recover the value of the goods, you lost the cargo, capital and profits.
Now, the question is, it doesn’t matter what goods you are exporting, are you willing to lose your cargo, capital and profit? Can you afford it? All the times?
Incoterms 2000 however, does not indicate “obligation” in A3 & B3 (Contract of Insurance) both for buyer and seller for all trade terms except CIF and CIP only. Buyer does not owe a duty to seller to procure insurance for his own benefit and vice versa. It is clearly not an obligatory, but this does not mean insurance is unnecessary. Of course insurance is an ‘additional’ cost which does not add value to the goods and considered ‘gone’ payment. But in the event the mishap happens, it makes a lot of different between gone and gain.

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