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Trading Terms

Contingency insurance (or difference in conditions)

Greetings, students! Today, we will be discussing the concept of contingency insurance in international transactions. As you may know, when two parties engage in an international transaction, they often take out insurance to protect themselves from any potential losses. However, sometimes there may be gaps in this coverage, which is where contingency insurance comes into play.

Contingency insurance is essentially an additional insurance policy taken out by one party to complement the coverage already taken out by the other party. This ensures that any potential gaps in coverage are filled, providing a more comprehensive protection for both parties.

Let's take an example to better understand this concept. Imagine an open account exporter, using FOB Incoterms, who is not obligated to insure the goods during the main international transport. However, they may still choose to take out contingency insurance to cover any potential losses or damages to the goods. This not only protects the seller from any financial loss, but also helps maintain a

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