Five types of insurance your business needs when operating in foreign countries
As soon as your business starts to operate outside its home territory, it becomes exposed to new risks and uncertainties.
Not only do different countries have different laws and regulations, but the distances involved when importing or exporting goods also present obvious risks. Increasing globalisation means that even relatively young, small businesses are often involved in international trade. It’s important to be aware of the risks involved and the kinds of commercial insurance you need to counter these.
Different risks apply in different markets, but here are five general policies that any business operating in foreign markets should consider.
- Trade credit insurance
Instead of asking for payment on ordering or on delivery, it’s commonplace for businesses to give credit to regular customers. International trade relies on extending credit to customers. This puts the supplier at risk of losing money if the buyer goes bankrupt or is unable to pay. Trade credit insurance protects a business against the non-payment of amounts owed by customers.
- Political risk insurance
This is often sold alongside trade credit insurance and specifically insures against non-payment due to political unrest or currency issues. The former could include war, revolution or other forms of civil violence, as well as your goods being confiscated or appropriated by the government, or the government choosing to frustrate or repudiate your contract. Currency issues could include dramatic changes in the exchange rate due to political causes.
- Cargo insurance
Also known as freight insurance, cargo insurance protects your goods against loss or damage during shipping. Standard causes that are covered include acts of God, civil unrest, strikes, riots and terrorism. Goods can be insured for the full value declared and for warehouse-to-warehouse delivery, as well as for loss of income due to exceptional delays.
- Business travel insurance
Sometimes standard travel insurance isn’t enough, especially if you make regular long-haul business trips abroad. Specialist business travel insurance includes insurance for business equipment such as laptops and samples, as well as for business money. It can also include replacement colleague cover, so that another person can make the trip and represent your business if the original representative is unable to travel at the last minute, or is unavoidably delayed due to no fault of their own.
- Product liability insurance
Liability insurance is a good idea whatever market you’re operating in, but it’s especially important if your goods are being sold abroad, where you have less direct control over what happens with them. When goods are being transported over long distances, there may also be a greater risk of faults developing.
When goods are being transported over long distances, there may also be a greater risk of faults developing.
Product liability insurance will protect you against legal claims arising from personal injury or property damage caused by your product. This is especially valuable when dealing with countries that may have different laws and customs to your own. Importers may also want to take out this insurance, as claiming costs from suppliers abroad for faulty products can be a difficult and long-winded process.
If your business is planning to start trading overseas – or are already – give us a call on 01223 324233. We can take a look at your existing covers and identify any areas that you may want to consider.
