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 a 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 accounted for properly.
Calculates the sum insured for a specific transit insurance policy taking into account the invoice value, freight cost, and incidental expense.
The Invoice value serves as a decisive factor in determining the sum assured under specific transit insurance. Aligning closely with the actual worth of goods, this metric ensures precise coverage. It forms a strategic foundation, enabling accurate assessment and robust protection throughout the transit journey. Likewise, freight cost actively influences the sum assured under specific transit insurance. By incorporating this essential factor, the coverage aligns with the comprehensive financial landscape, ensuring that the sum assured accurately reflects the total worth, safeguarding against potential risks during transit An Incidental expense also actively shapes the sum assured in specific transit insurance. This critical determinant ensures that the coverage accurately mirrors the comprehensive financial scope, addressing incidental costs and fortifying protection against potential risks during transit
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 should be under consideration. A comprehensive all-risk transit insurance policy can offer coverage against practically all the losses, except a few. On the other hand, insurance against named perils policy covers losses caused due to transport, accidents, fire, explosion, lightning, etc.
Tailoring the sum assured in a Specific Transit Insurance Policy is vital from a business requirement and plan customization perspective. Aligning it precisely with your goods in transit value ensures optimal coverage. This strategic approach not only safeguards assets but also streamlines the claim settlement process, meeting unique business needs effectively.
Case Study
A manufacturing company named R&L Inc. was based in Jamnagar in 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 insurance policy for the same. It was a one-time consignment, 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 consignment came. The manufacturing company and the insurers decided on the following factors:
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Since the value of the shipment was Rs 50 lakhs, it was a big contract. 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.
Including the cost of freight in the sum insured. The freight cost generally includes costs like packaging costs, loading charges, and carriage costs.
Also, the insurance cost and added an additional 10%, to take care of any incidental cost. Thus, calculated the sum insured for the one-time consignment that R&L Inc. had to export to a company based in Abu Dhabi.
In conclusion, determining the sum assured in a Specific Transit Insurance Policy is a strategic imperative, tailored to meet unique business requirements. Precision in aligning the sum with the cargo’s value is crucial to fortify against damage due to various transit risks. For businesses engaged in import and export, this process ensures comprehensive coverage under the umbrella of marine cargo insurance or marine transit insurance. Recognizing diverse types of transit, this strategic approach safeguards financial interests, providing a resilient safety net in the dynamic world of global commerce. It’s a proactive stance essential for ensuring the smooth flow of goods across intricate supply chains.
For informed decisions and secure transit, reach out to SecureNow at +91 96966 83999 or email support@securenow.in. Trust us for comprehensive transit insurance solutions, ensuring the protection of your assets and providing peace of mind throughout every journey. Your security is our priority.
About The Author
Simran
MBA Insurance and Risk
With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.
