The specific transit insurance policy offers coverage for cargo or goods carried through various modes of transport. This insurance policy offers protection to any consignment for one trip. This means that the protection ceases for this transit insurance policy as soon as the cargo reaches its destination.
The major benefit of this specific transit insurance policy is that it can be a customized type of policy. The sum insured in specific transit insurance policy is not a fixed amount but instead, is based on the agreed value between the insurance company and the insured.
The sum insured is based on the maximum value at risk. This means that the sum insured is the highest value of the property or goods carried on or in a vehicle. The insured needs to understand that the sum insured represents the full value at risk and hence must be properly accounted.
The sum insured for specific transit insurance policy is calculated taking into account the invoice value, freight cost and the incidental expense. Following are the calculations for the same.
- Specifically, for inland voyages, the sum insured is calculated as:
=Invoice value+ 10% -15%
- For overseas transit, the sum insured is mostly calculated as:
=Invoice value + Insurance cost + freight cost+10% -15%
While determining the sum insured, all the factors or the perils which can cause damage are also to be taken into consideration. A comprehensive all risk transit insurance policy can offer coverage against practically all the losses, except a few. On the other hand, an insurance against named perils policy covers for losses caused due to transport, accidents, fire, explosion, lightning etc.
A manufacturing company named R&L Inc. was based in Jamnagar since 2007. Its main business was manufacturing electronic parts and exporting them to clients. They also used to provide additional services like designing, testing, distributing, and providing return/repair services for electronic components. Due to factors like availability of quality materials, low fixed cost for operations, speed of management and an excellent team of employees, the company had expanded its operations on a large scale all over India. It exported its electronic parts to different regions of India.
In 2019, the company got a consignment to export electronic parts to Abu Dhabi. The consignment was worth Rs 50 lakhs. Since it was a big consignment, the owners of the manufacturing company decided to take an insurance policy for the same. It was a one-time consignment, and after much deliberation, the owners decided to go forward with a specific transit insurance policy. When the time to decide the sum insured for the given consignment came, the manufacturing company and the insurers decided on the following factors:
Since the value of the shipment was Rs 50 lakhs, it was a big contract and hence the sum insured was to include the entire value of the invoice. Insuring for a lower value would not be of any use as it would not be able to replace the value of the consignment in case of any loss.
Apart from sea perils, other various perils that could cause any damage or loss to the consignment were also taken into consideration. This included perils like fire, explosion, lightning, accident etc.
The cost of freight was also included in the sum insured. The freight cost generally includes costs like packaging costs, loading charges and carriage costs.
Also, the insurance cost and an additional 10% was added to take care of any incidental cost. Thus, the sum insured was calculated for the one-time consignment that R&L Inc. had to export to a company based in Abu Dhabi.