marine insurance policy

As the name itself says, an open marine insurance policy covers an indefinite number of inland movement of consignments. This insurance policy remains open until cancelled or the sum insured is exhausted, whichever comes first. Under the open marine insurance policy, successive shipments are declared to the insurance company, and they automatically get covered under the open marine insurance policy on or after the policy’s inception date.

Usually, it is an annual cargo insurance policy which is issued for one sum insured to cover a number of dispatches. Here the policy covers a number of dispatches until the sum insured is over. Also called, floating policy, the open policy helps in saving the policyholder from buying the individual insurance policy for each journey.

The open insurance policy may cover both the incoming and outgoing consignments to-and-fro India. To ensure you choose the correct sum insured, make sure that the coverage mentioned under the open marine insurance policy is in accordance to the estimated annual turnover of goods.

The open marine insurance policy offers coverage against various kinds of risks like sinking, fire, explosion, earthquake, lightning, etc. Open policies are highly useful for the policyholder when he/she conducts a significant volume of similar transactions in a year. Such policies can be purchased by anyone who is involved in the business of movement of goods, like import/export merchants, contractors, banks, buying agents, a shipping firm, etc.

The sum insured of an open marine insurance policy is fixed on the ‘Agreed Value’ basis. Usually, there is a 10% margin on the invoice which is added to sum insured, for incidental expenditure.  Further, it is feasible to expand open marine insurance cover and get coverage for riot, war, strike, etc.; by paying additional premium rates.

Case: 1

L.S Shipping is a reputable name in the shipping industry. The company has partnered with various firms whose goods it transports from one country to another. As the company regularly transports goods from one country to another, it has purchased an open marine insurance policy to get coverage in case any misfortune happens.

As the company is regular with its transportation, it opts for an open marine insurance policy which allows it to cover several dispatches until the sum insured is over. It is an annual policy which saves L.S Shipping from the hassles of insuring every consignment. The open policy bought by L.S Shipping offers coverage against various perils, including fire, earthquake, flood, theft, etc. With the help of one sum insured, the company has successfully insured its number of dispatches.

Case: 2

Since 2000, J.K Garments has established a name for itself in the clothing business. The company has a vast clientele base which spread in different parts of the world, including USA and Malaysia.

Last year, when it was sending goods domestically, heavy rainfall happened and damaged substantial boxes of consignment even when they were packed properly. When the consignment reached the destination, the buyer refused to take the delivery. J.K Garments had to incur a loss of Rs 50 lakh due to the accident.

The incident made J.K Garments think what could have been done to avoid the loss.

Read More: Understand Your Duties as Insured Under a Marine Insurance Policy

Solution

The situation would have been different if J.K Garments had a marine insurance policy. The policy would have helped J.K Garments by covering losses which the company had to incur due to rain. At such time, the insurer would have covered the losses or damages and thus saved J.K Garments from dealing with a financial loss.

As J.K Garments regularly exports goods worldwide, the company should buy an open marine insurance policy which covers several dispatches under the single sum insured. The policy will cover the multiple number of dispatches till the sum insured is over. It means, the company would be free from buying a marine insurance policy for each consignment as one policy would be sufficient to cover a number of dispatches.