Institute cargo clauses come embedded in a marine insurance policy which covers cargo in-transit. These clauses are there to specify what kind of items in the cargo is covered in case of any loss or damage to the shipment. It is interesting to note; institute cargo clause can cover anything from the cargo to the container that holds its value along with the transport mode which is used to ship the items.

Mainly, there are three basic sets of institute cargo clauses; A, B, C. Your coverage is directly related to your insurance premium. It means, the higher the marine insurance premium you pay; the more would be 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 insurance coverages and therefore, you should be ready to pay the high premium for this as you would be getting the extensive cover.
  • Institute Cargo Clause B: It is considered to be slightly a restrictive cover and therefore, the premium is moderate. The policyholder mainly asks for the 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 is restricted to goods which are in transit. The items being shipped would be considered the goods 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; in case cargo is lost or damaged during transit; the amount would be refunded or replaced to whom who holds its ownership.

For example, the shipment receiver may not file a claim on their inventory until it receives it. In case, the shipper holds ownership, and the insured cargo gets damaged, the shipper would get the benefits of the insurance for their goods. In this way, buying a marine insurance getting the cargo insured is beneficial for both the parties.

In any case, the above cargo clauses will not offer coverage in the following situations=

  • Loss or damage happens due to willful misconduct of the policyholder
  • Loss or damage happen due to insufficiency or unsuitability of packaging
  • Loss or damage happen due to delay
  • Loss or damage happen 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.

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. 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; the premium would be low as the coverage would be limited. For instance, Institute Cargo Clause B doesn’t cover loss or damage due to fire, and therefore, it has lower insurance premium as compared to Institute Cargo Clause A.