This clause requires insurance on goods while they're being transported from one place to another. For example, if you're shipping 1,000 boxes of electronics from a warehouse to a customer and the truck crashes, transit insurance pays for the damaged goods. This matters legally because goods in transit are at risk from accidents, theft, and weather, and someone must pay if they're lost or damaged—the contract specifies who bears that risk. In international trade, transit insurance is often mandatory under the Incoterms rules (a set of standard shipping terms used worldwide). The clause typically says who buys the insurance, what route it covers, and whether it includes theft or only accidental damage.
If you're selling goods, try to make the buyer pay for transit insurance once the goods leave your warehouse—this is called "free on board" or FOB terms, and it's standard practice. If you must buy it, specify exactly what's covered (theft, weather, accidents) and get proof the insurance is active *before* goods leave your premises. For high-value goods, consider paying extra for "all-risks" coverage rather than basic coverage. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires insurance on goods while they're being transported from one place to another.
Why should I care about this clause?
For example, if you're shipping 1,000 boxes of electronics from a warehouse to a customer and the truck crashes, transit insurance pays for the damaged goods.
What are my options?
This matters legally because goods in transit are at risk from accidents, theft, and weather, and someone must pay if they're lost or damaged—the contract specifies who bears that risk.
How does this affect small businesses?
In international trade, transit insurance is often mandatory under the Incoterms rules (a set of standard shipping terms used worldwide).