Importing products sounds simple—until something goes wrong. A shipment goes missing, goods get damaged, or worse, you find out the hard way your insurance doesn’t cover products from certain countries. If you’re importing goods, insurance isn’t just a box to check off, it’s your safety net. Let’s break down what you need to know, without the headache.
Why Insurance for Imports Matters
When you’re bringing goods into the country, whether to resell or as parts for something you’re manufacturing, there’s a lot that can go wrong. Stuff gets damaged, lost, or even stolen. And if you’re importing from places with questionable quality standards or political turmoil, the risks get even higher. Whether your shipments are coming by sea, air, road, or rail, knowing what insurance covers you, and what doesn’t, is essential to protect your business.
The Types of Insurance You Should Know About
- Motor Truck Cargo Insurance
Think of this as your baseline protection. It covers damage or loss during transit, whether by road or rail. Stuff happens: accidents, natural disasters, theft. Having cargo insurance makes sure you’re not left holding the bag if something goes wrong. - Marine Insurance aka Ocean Cargo
This one’s for ocean and air freight. It covers all the typical maritime risks: vessels sinking, piracy, and collisions. If you’re relying on ocean transport, especially for high-value shipments, this is your go-to. - Liability Insurance
If your product ends up causing harm, liability insurance has your back. It covers legal fees, compensation, and other costs if someone decides to take you to court. This can include product liability, errors and omissions, and general liability.
NOTE: Although we don’t handle the following three types of insurance at Graf, they are important to understand for importers.
- Customs Bond Insurance
Required by U.S. Customs and Border Protection (CBP), this surety bond ensures you’re playing by the rules and paying all the necessary duties, taxes, and fees. This insurance is a must if you’re dealing with high-value or high-risk goods. - Export Credit Insurance
When you’re extending credit to overseas buyers, this coverage protects you if they don’t pay up. Political issues or financial trouble on their end? No problem—this insurance has you covered. - Political Risk Insurance
If you’re dealing with countries that have unstable political environments, this insurance is worth considering. It protects you from losses resulting from things like expropriation, currency issues, or political violence.
Why It Matters Where Your Goods Come From
Insurance companies are picky about where your products are coming from. It’s not just about the type of product you’re importing; it’s about where it’s made.
Take Chinese drywall, for instance. Years ago, defective drywall from China caused serious property damage in the U.S. Insurers are still cautious about covering it. If you’re installing Chinese drywall, you might find it hard to get coverage—or you could be straight-up excluded.
And it’s not just drywall. If you’re importing food items, like salamis, insurers care about the quality control standards in the country of origin. Some places are known for their strict standards, others, not so much. Insurers pay attention to that.
The OFAC List: What You Need to Know
The OFAC (Office of Foreign Assets Control) list is a government-maintained list of countries under sanctions or with restricted diplomatic relations. If you’re importing from one of those countries, insurers might refuse to cover your goods or slap you with sky-high premiums. And be aware that the list is constantly changing.
Understanding Tariffs and Their Ripple Effect on Import Insurance
Navigating the complexities of importing and reselling products includes staying abreast of how external factors, like tariffs, can impact your business, especially when it comes to insurance. Let's delve into how recent tariffs might affect your import insurance and what you can do to stay protected.
When the government imposes tariffs, essentially taxes on imported goods, it increases the overall cost of those products. This uptick doesn't just hit your bottom line; it also affects the insured value of your shipments. Since insurance coverage is typically based on the total value of the goods, including duties and taxes, higher tariffs mean higher insured values. Consequently, this can lead to increased insurance premiums. For instance, if tariffs add an extra $10,000 to your shipment's value, your insurance coverage needs to reflect this new total, potentially raising your premium costs. (Resource: //usacustomsclearance.com/)
The Domino Effect: From Tariffs to Insurance Premiums
The introduction of tariffs can set off a chain reaction:
Increased Product Costs: Tariffs raise the cost of imported goods.
Higher Insured Values: With increased product costs, the declared value for insurance purposes also rises.
Elevated Insurance Premiums: Higher insured values can lead to higher insurance premiums to cover the increased risk.
This pattern has been observed in various sectors. For example, tariffs on construction materials like steel and lumber have led to increased costs in home building and repairs, subsequently driving up homeowners' insurance premiums.
Cargo Insurance Considerations Amidst Rising Tariffs
For importers, especially those dealing with substantial shipments, it's crucial to reassess cargo insurance policies in light of escalating tariffs. Key considerations include:
- Insured Value Inflation: Ensure your policy covers the full value of goods, inclusive of increased tariffs, to avoid underinsurance.
- Per Loss Limits: Verify that your policy's per loss limit is sufficient to cover the higher value of shipments due to tariffs.
- Policy Adjustments: Regularly review and adjust your policy to reflect current shipment values and associated risks. citeturn0search4
Staying Ahead: Proactive Measures for Importers
To mitigate the impact of tariffs on your import insurance:
- Stay Informed: Keep abreast of tariff changes that affect your products.
- Communicate with Insurers: Regularly discuss with your insurance provider to ensure your coverage aligns with current shipment values.
- Risk Management: Consider diversifying suppliers or exploring alternative markets to reduce tariff exposure.
By proactively addressing these areas, you can better navigate the challenges tariffs pose to your import business and maintain adequate insurance coverage.
How to Stay Ahead of the Game
Tariffs are more than just economic tools; they have tangible effects on various aspects of business operations, including import insurance. Understanding this interplay and taking proactive steps can help safeguard your business against unforeseen financial strains.
The global economy is connected in ways that make importing easier than ever. But with more opportunities come more risks. Whether you’re bringing in finished goods, parts, or food products, knowing how your insurance works is critical.
The best move? Work with an insurance pro who understands international trade and can help you figure out what’s covered, what’s not, and how to stay protected. At Graf Insurance, we’re here to make sure your business is covered—no matter where your products are coming from. Reach out to us today to get the peace of mind you deserve.
