How much does business insurance for importers cost?

The cost of business insurance for importers varies significantly. Insurers assess several factors including the type of goods you import, their value, the volume of your shipments, your trading history, the countries of origin and destination and any previous claims. Engaging an insurance broker can help you find suitable cover at a competitive price tailored to your specific importing risks.

What does importer business insurance typically not cover?

While comprehensive, importer business insurance policies do have exclusions. Some common exclusions include losses arising from war terrorism nuclear risks inherent vice or inherent defect of the goods wilful misconduct by the insured and specific regulatory non compliance leading to seizure or penalties.

How do I make a claim if my imported goods are damaged or lost?

To make a claim, you should contact your insurance broker or insurer as soon as you become aware of any damage or loss. You will need to provide detailed documentation such as bills of lading commercial invoices packing lists evidence of damage or loss for example photos and any survey reports from the carrier or port authorities.

Does product liability insurance cover product recall costs?

Standard product liability insurance generally covers third party bodily injury or property damage caused by a defective product. However, it typically does not cover the direct costs associated with a product recall such as retrieving defective products from the market testing costs notification expenses and reputational damage. Specific product recall insurance or an extension to your existing policy is usually required for this type of cover.

What happens if Australian customs rejects my imported shipment?

If your shipment is rejected by Australian customs due to issues like non compliance with import regulations incorrect documentation or prohibited goods, your cargo insurance policy may or may not cover the loss depending on the specific cause of rejection and the policy terms. It is unlikely to cover fines penalties or storage costs incurred due to regulatory non compliance. Product liability insurance would not cover this initial customs rejection.

Is there a difference between insuring fragile or perishable goods and general cargo?

Yes, there is a big difference. Fragile or perishable goods such as glass fresh produce or pharmaceuticals often require specialised handling temperature controlled environments and faster transit times. Insuring these items typically involves higher premiums and more specific policy conditions or endorsements to cover the unique risks associated with their delicate nature or limited shelf life. You may need to demonstrate appropriate packaging and transport protocols.

Why should I use an insurance broker for my importing business?

Using an insurance broker offers several advantages for an importing business. Brokers specialise in understanding the complex risks associated with international trade and can access a wide range of policies from various insurers including niche providers. They can tailor cover to your specific needs negotiate competitive premiums and provide invaluable assistance during the claims process saving you time and ensuring you have appropriate protection.

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Under Australian Consumer Law, an importer is deemed the manufacturer if the actual manufacturer has no place of business in Australia, making you legally responsible for product safety defects.
Marine cargo cover usually ends when goods reach the warehouse, so you'll need a 'storage in transit' or 'warehousing' extension to protect stock held at third-party (3PL) warehouses.
Insuring goods for their 'landed value' (cost plus freight plus around 10%) lets you recover non-refundable GST and customs duties in a total loss claim.
Standard policies cover General Average contributions and 'Sue and Labour' costs to minimise damage, but exclude shipments involving countries or entities on Australian or international sanctions lists.

Why do importers need business insurance?

There has been a steady increase in imports into Australia over the last few years, particularly from countries such as China, where cheap labour costs mean cheaper prices for importers.

But with this increase in imports has come greater risk for importers, with shipping accidents more likely to happen due to overcrowded sea lanes. Increasing vigilance by Australian regulators has also meant that inferior or dangerous imported goods can now lead to heavy fines, product recalls and lawsuits against importers.

In such an environment, importers have little choice but to insure their goods against every possible eventuality, from the time they are manufactured overseas to the time they arrive at the warehouse door in Australia.

What types of risks do importers face?

Importers face numerous risks while their goods are in transit.

During manufacturing

Once they are manufactured, the goods are at risk of being lost or damaged during transportation from the manufacturer’s premises to the dock. There, they may face delays prior to shipping, such as problems with documentation and the possibility of pilfering or theft.

During transportation

Once the goods are loaded onto a cargo ship they can face a range of hazards including being damaged by seawater, being washed overboard in storms and being damaged or lost if the ship runs aground, sinks or capsizes.

Once they have arrived in Australia

When (and if) they arrive in Australia, they then face the risk of delays due to possible documentation problems, industrial action or customs delays. Once they leave the port, they then face the risk of loss or damage during transportation to the importer’s warehouse.

Even if the goods arrive uneventfully, if they are fragile or perishable in any way, they could still end up being damaged due to poor packaging or rough handling, or be spoilt due to delays in transit.

During distribution within Australia

Even once they are shipped out to retailers and appear on the shelves, the importer still faces risks. If the goods are found to be faulty or cause injury to consumers, the importer faces a product recall at best and at worst, the prospect of a lawsuit.

When is business insurance compulsory for importers?

Business insurance isn’t technically mandatory for importing to Australia, but you might find it hard to get very far without it.

International Commercial Terms (Incoterms) will often specify insurance requirements, in which case having insurance might be mandatory, and beyond that it’s simply common sense to protect your investments.

What are Incoterms?

Incoterms are essentially a set of pre-made trade agreements used to divide costs between buyers and sellers and streamline international trade.

They determine who’s going to be responsible for costs like import duties, handling and insurance for goods in transit.

Only two of the Incoterms specify that the seller is responsible for insuring goods in transit, and in many cases the importer will need to organise their own insurance.

What type of insurance do importers need to consider?

In addition to any of your more general business insurance needs, there are three types of cover that relate specifically to the importing or exporting of goods:

Some form of liability insurance is often standard for businesses, but as an importer you have some special considerations. These may include the risk of inadvertently importing dangerous goods (product liability) or otherwise causing damage in the course of your business.
For example, if you import goods that turn out to be defective and cause injury as a result, your liability insurance might cover the cost of paying compensation to the injured parties, and/or legal expenses incurred in defending yourself against those claims.
Your warehouses goods should probably be insured, or one fire or accident could wipe out all your stock. Even if you’re using a third party logistics provider who is financially responsible for the goods you’re paying them to store, it’s possible that an accident might leave them insolvent and destroy your chances of recovering compensation.
Having your own insurance for goods in storage is important, regardless of whether you’re handling the storage yourself or using a third party provider.
Often known as “transport insurance”, this is probably one of the most essential core cover types for importers, and anyone else who moves goods domestically or internationally.
This is because some of the main risks of damage come while goods are being transported, and there’s also a significantly increased risk of liability issues.
Some of the main hazards might be encountered in transit, including:
- Theft, pilferage or hijacking
- Errors or mistakes in transport, such as road accidents, plane crashes or damage to improperly secured goods
- Exposure to rain, salt, sun, sharp temperature changes and other environmental hazards
Meanwhile, liability issues may include:
- Maritime salvage liability. If a vessel is forced to eject goods to prevent sinking, the cost of the goods is paid for by everyone whose goods weren’t ejected.
- Third party property damage. For example, if a car is damaged after your goods are ejected from a truck.
- Third party injury or death. For example, if improperly packaged goods cause injury by suddenly shifting.

Which insurance is right for my importing business?

Insurance is typically priced by risk, so your costs will tend to match your cover needs when buying through a broker.

For example, if you’re using a contractor to carry goods by road then you might not be paying as much for trucking liability insurance. But if your own business is doing the trucking, your liability insurance might cost more.

Speak to a broker

The cost and ideal type of cover will depend on your situation, and might be most effectively bought through a broker.

With a broker, you might have a policy for your main business assets and operations and then simply call your broker to set up a policy as needed for each new load of cargo.

What does business insurance for importers cover?

Business insurance for importers can be divided into two main types: cargo insurance and products liability insurance. Cargo insurance covers the importer’s goods during transit and products liability insurance covers the importer in the event that the goods are found to be faulty or dangerous.

There are three main types of cargo insurance:

Open cover insurance. This insures an importer’s cargo on all journeys over a set period of time (often annually).
Single transit insurance. This provides cargo insurance for one journey only, from warehouse to warehouse.
Contingency insurance. This provides additional cover if the importer has not arranged the insurance themselves.

While terms and conditions may vary and importers may require special conditions to cover specific cargoes and circumstances, cargo insurance will usually cover situations such as:

Overturning or derailment during land transportation
Stranding, grounding, sinking or capsizing
Loss overboard during loading or unloading
Washing overboard, if cargo is on deck

Jettison
Fire or explosion
Malicious damage
Theft or pilferage
Seawater damage

A cargo insurance broker can find you the best price on cargo insurance and make sure that it is adequate for your needs. They can also assist you with any claims that might arise.

Why are importers sometimes considered manufacturers?

The second type of importers business insurance is products liability insurance and this is just as important, if not more so, than cargo insurance.

Under the Trade Practices Act (now known as the Competition and Consumer Act), an importer is ultimately responsible for the safety of any product they introduce into the Australian marketplace.

Furthermore, if the manufacturer of the product does not have a place of business in Australia, the importer is deemed to be the manufacturer and is accountable for all aspects of the product’s design and safety in litigation.

So if you don’t have full control over the product’s manufacture, including the raw materials used to make it that often come from foreign third party suppliers, you would be well advised to have products liability insurance in case of unforeseen problems down the track.

There has been large-scale product recalls in recent years, both in Australia and in the US, and two thirds of those in the US were for imported products largely made in China. So, rather than risking becoming a target for litigation, importers need to cover themselves with products liability insurance.

Products liability insurance will usually cover things such as:

Court costs and legal defence fees
The cost of care, loss of services and restitution for death, resulting from an injury found to be caused by the product
Costs for damage or loss of use of property found to be caused by the product

Talk to a broker about business insurance for importers

Frequently asked questions

The cost of business insurance for importers varies significantly. Insurers assess several factors including the type of goods you import, their value, the volume of your shipments, your trading history, the countries of origin and destination and any previous claims. Engaging an insurance broker can help you find suitable cover at a competitive price tailored to your specific importing risks.
Standard product liability insurance generally covers third party bodily injury or property damage caused by a defective product. However, it typically does not cover the direct costs associated with a product recall such as retrieving defective products from the market testing costs notification expenses and reputational damage. Specific product recall insurance or an extension to your existing policy is usually required for this type of cover.
If your shipment is rejected by Australian customs due to issues like non compliance with import regulations incorrect documentation or prohibited goods, your cargo insurance policy may or may not cover the loss depending on the specific cause of rejection and the policy terms. It is unlikely to cover fines penalties or storage costs incurred due to regulatory non compliance. Product liability insurance would not cover this initial customs rejection.
Yes, there is a big difference. Fragile or perishable goods such as glass fresh produce or pharmaceuticals often require specialised handling temperature controlled environments and faster transit times. Insuring these items typically involves higher premiums and more specific policy conditions or endorsements to cover the unique risks associated with their delicate nature or limited shelf life. You may need to demonstrate appropriate packaging and transport protocols.
Using an insurance broker offers several advantages for an importing business. Brokers specialise in understanding the complex risks associated with international trade and can access a wide range of policies from various insurers including niche providers. They can tailor cover to your specific needs negotiate competitive premiums and provide invaluable assistance during the claims process saving you time and ensuring you have appropriate protection.

Sources

Thank you for your feedback!

Written by

Alex Reid

Expert

Alex Reid is Finder’s business insurance cadet. He has a Master of Marketing from the University of Technology Sydney, with a background in business and sales. When not writing about business insurance for Finder he's a keen scuba diver, recently completed his 200th hour underwater and his PADI Divemaster certification. Before working at Finder he lived in Hangzhou China, where he studied Mandarin and Chinese culture. See full bio

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2 Responses

LaurenApril 23, 2017

Hi there,
Myself and my business partner are starting up a new business of importing hair extensions, brushes, lash extensions and accessories to sell online and in our Salon. I’m just wondering because it’s a new business what insurance would we need to go for?

Finder

ZubairApril 26, 2017Finder

Hi Lauren,

Thank you for your question.

An advisor can help you in deciding the type of cover you need, please complete the contact form to get quotes for professional indemnity insurance quotes. Once you have done so an adviser will contact you.

Please make sure to read the eligibility criteria, features, and details of the policy, as well as the relevant Product Disclosure Statement of the policy before making a decision and consider whether the product is right for you. If necessary, speak to the insurance brand to verify any details.

Cheers,
Zubair

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