The traditional marine insurance policy covers only the market value of the ship commonly referred to as ‘Shipowner’s Interest’. However, there are other additional costs apart from the market value of the vessel requiring coverage. Some costs like sundries for the ship replacement, buying an equivalent new ship, such as office expenses, or brokerage also require coverage. In this article, we’ll get to know about the increased value clause in marine inland transit insurance.
The insurance industry recognized these additional costs. It realizes that an insured has an additional insurable interest that goes beyond the vessel’s market value. Also, the excess of the sum insured under the hull and machinery insurance is the insurable interest.
Increased value clause in Marine Inland Transit Insurance
The increased value clause in marine inland transit insurance acts as an additional cover for the insured. This cover ensures an additional 20% to 25% of the insured value of the vessel in case of total loss.
The insured has an additional insurable interest in marine inland transit insurance, which is in excess of:
- The vessel’s market value
- Hull insurance
The Increased Value clause in inland transit insurance makes it possible to replace the vessel and minimize the economic consequences of the total loss.
In marine inland transit insurance, the likelihood of a total loss is relatively low as compared to other perils and risks. Hence some insurers started offering a lower premium level in the increased value insurance. Shipowners started using the increased value cover to also cover the ship’s market value. They realized they could save on the premium costs. As a result, the vessel became underinsured on the hull. Hence as an outcome, hull insurers reduced the compensation for liabilities, salvage, and general average claims.
The excess liability counter this reduction in hull cover, the increased value clause in marine transit insurance covers the ‘excess liabilities’. Proportion reduced by the insurer due to the under insurance in the hull category.
Case Study: 1
Since 2000, K.P Electronics has been in the business of exporting electronic circuit items within India. The majority of its export took place through waterways. K.P Electronics used the ship of Lumar Cargo for transportation via waterways.
One day, K.P electronics got a huge consignment to export its electronic items to Kerala. The ship got caught in a heavy storm during the transport.. The storm not only damaged the electronic items loaded on the ship but also devastated the entire ship.
As Lumar Cargo had a marine inland transit insurance policy. The company approached its insurer who settled the claim after analyzing the entire situation. Also, the marine inland transit insurance policy had an increased value clause attached to it. As a result of this clause Lumar Cargo also availed an additional 20% of the insured value of the vessel. The additional increased value helped Lumar Cargo to cover the sundries for the ship replacement.
Additional Read: Why do You Need Marine Insurance?
Case Study: 2
H.L Constructions based in Goa exported a consignment of construction items to Orissa with the help of ‘Marina Transporters’. The consignment had to reach Orissa within 4 days of transit. However, the ship caught fire on its way. Most of the items suffered damages. The crew members could not control the fire. The ship was deserted and people were rescued with the help of a rescue boat. The owner of the ship (Marina Transporters) immediately informed the insurance company about the incident.
A surveyor was appointed to investigate the matter. He concluded that the ship suffered complete damages and it could not be restored. A short circuit in the vessel’s engine caused the fire. The surveyor helped the owners of the ship to claim the marine inland transit insurance. The increased value clause in the insurance policy helped them to achieve an additional 20% of the insured value.
On SecureNow digital platform, marine business owners can compare the clauses of different insurance policies and also calculate the rates offered by various insurance. Online comparison helps you make a rational choice.