Important Marine Cargo Open Policy terms
Maximum sum insured
The policy shows a figure which is the insurer’s maximum liability for a claim in any one conveyance. The customer should make sure that the value shown is enough to cover the value of the largest shipment and then double that figure to cover the possibility of two shipments being sent on the same conveyance.
Location clause
This clause limits the maximum amount payable from one accident or series of accidents occurring in one location; for example, before shipment. It is usually, but not always, the same amount as the bottom limit.
Classification clause
The type or age of a ship is important when fixing the rate of premium. However, the names of ships carrying goods are not usually known when fixing premium rates for a marine cargo open policy.
This clause provides that the pre-agreed premium rate for the marine cargo open policy refers to goods in transit in ships under a certain age and up to a certain Standard/Class. An additional premium may be payable for transits on other ships.
Basis of valuation
Commercial shipments are normally insured on the basis of the invoice value plus all transit and other known costs, plus a percentage to cover hidden costs and a proportion of the buyer’s expected profit. This value could be shown as CIF plus 10%.
The agreed basis is noted on the policy so that if a declaration is accidentally overlooked, a loss will remain automatically covered for the agreed value. This valuation is also used by the merchant when declaring details of shipments to the insurer, including annual turnover amounts in the case of annually-adjustable policies.
When insuring imports, two valuations are often noted on the policy. One applies to FOB orders (for instance, FOB plus 30%) and the other to C&F orders (for instance, C&F plus 10%). The added percentage should be enough to cover freight as well as other costs for FOB orders. Having two valuations makes it easy for the merchant to decide which value is declared to the insurer.
Source: Insurance Council of NZ - Marine Cargo Open Policy Handbook
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