Institute Cargo Clauses in Marine Cargo Insurance
Institute cargo clauses come embedded in a marine insurance policy that covers cargo in transit. These clauses are there to specify what kind of items covers in the cargo in case of any loss or damage to the shipment. It is interesting to note; the institute cargo clause can cover anything from the cargo to the container that holds its value along with the transport mode used to ship the items.
Mainly, there are three basic sets of institute cargo clauses; A, B, and C. Your coverage is directly related to your Marine insurance premium. It means, that the higher the marine insurance premium you pay; the more would be the coverage you get. Here are the three institute cargo clauses as detailed below:
Institute Cargo Clause A:
It is considered to be one of the widest marine cargo insurance coverage and therefore, you should be ready to pay the high premium for this as you would be getting extensive cover.
Institute Cargo Clause B:
Considered to be slightly a restrictive cover and therefore, the marine cargo insurance premium is moderate. The policyholder mainly asks for coverage for some more valuable items or only a partial cargo.
Institute Cargo Clause C:
It is the most restrictive coverage, and you should be ready to pay the low premium. However, as the premium would be low, your coverage would also be less.
Each of the institute cargo clauses mentioned above restricts goods in transit. The items shipped would be in transit only if they have left from the original location and are still in transit to the destination.
Read More: What is a Cargo Insurance Policy?
In a case, where goods are insured during transport, irrespective of the fact whether it is by land, air, or sea; if caused lost or damaged in case of cargo during transit; the amount would be refunded or replaced to whoever holds its own.
For example, the shipment receiver may not file a claim on its inventory until it receives it. In case, the shipper holds ownership, and the insured cargo damages, the shipper would get the benefits of the insurance for their goods. Thus, buying marine insurance and getting the cargo insured is beneficial for both parties.
In any case, the above cargo clauses in Marine Cargo Insurance will not offer coverage in the following situations:
- Loss or damage happens due to willful misconduct of the policyholder
- Any loss or damage happens due to insufficiency or unsuitability of packaging
- Loss or damage happens due to delay
- Any loss or damage happens due to insolvency or financial default of the operators of the vessel
- Loss or damage or expenses directly or indirectly arise due to nuclear fission, atomic activity, etc.
In conclusion, an understanding about institute Cargo Clauses in marine cargo insurance is essential for mitigating risks and ensuring comprehensive coverage for goods in transit.
Case
As L.K Engineering exports different engineering items in various parts of the world via sea, the company has decided to purchase a marine insurance policy. In order to get coverage against different types of risks and perils like flood, earthquake, fire, etc.
Read More: What Is Subrogation in Marine Insurance?
Considering the nature of its business, the company decided to go for Institute Cargo Clause A which offered comprehensive cover and included various kinds of risks and perils of the sea. As the company bought Institute Cargo Clause A which was extensive, the company had to pay an extra premium for it. In case, the company had purchased Institute Cargo Clause B; due to limited coverage, the premium would be low. For instance, Institute Cargo Clause B doesn’t cover loss or damage due to fire, and therefore, it has a lower insurance premium as compared to Institute Cargo Clause A.
