“Per bottom limit” is an important feature of an open cover marine insurance policy. An open marine insurance policy describes the cargo, voyage, and insurance cover in general terms. It will naturally take care of all the shipments which fall under its scope. Issued for 1 year, this policy is renewable annually, and either the insured or insurance provider can cancel it upon giving notice. So, an open cover is a promise for ensuring the security of future shipments about which specific details are not available in the present times. This open cover marine insurance policy is useful for those who make large exports and imports regularly. Such as import/export merchants, banks, buying agents, contractors, shipping firms, etc.
The open cover marine insurance policy would have a “Limit of liability” which is an agreed condition. According to this, the insurance provider agrees to the maximum sum insured and would not be liable for any shipment where the sum assured exceeds the agreed limit. “Limit of Liability”, is further based upon various factors such as the ones mentioned below.
- Per bottom limit
- Location limit
- Conveyance
- Voyages and cargoes
Per Bottom Limit Explained
The “per bottom limit” states the maximum amount for which your insurance provider would be liable in case of claims. This is the maximum anticipated value of the cargo on a ship and any value which is above this limit is not intended to be covered under the marine insurance policy unless amendments are being made to the policy along with prior information to the insurance provider. This rule is applicable when the goods are in an ordinary transit course.
The maximum amount that would provide by your insurance provider must be a figure larger than the shipment’s actual value. Usually, it’s a thumb rule that the limit of the policy would be twice the size of a large shipment. This is because there is a huge possibility of two shipments sending in the same conveyance or arriving at the destination together, etc. The term “per bottom limit”, was used in old times. It mainly refers to the bottom of the ship or the hull of the ship. Nowadays, the term “Conveyance limit”, is quite commonly used and can refer to any conveyance means like roads, rail, air, etc.
Hence, the “per bottom limit” is also known as the “sending limit” and the premium of the marine insurance policy is also calculated based on its sending limit as well.
Pros and cons of “Per bottom limit” feature
The “Per bottom limit” feature of an open cover marine insurance policy offers several advantages. It provides clarity and certainty by setting a specific coverage limit per vessel, ensuring adequate protection. It simplifies administration as multiple vessels can be insured under a single policy. It allows for flexibility in insuring vessels, accommodating changes in the fleet. It offers better risk management as the maximum liability for each vessel is clearly defined. Overall, it provides efficient and tailored coverage for marine risks.
While the “Per bottom limit” feature of an open cover marine insurance policy offers advantages, there are potential disadvantages. It may result in higher premiums if vessels with higher values are insured. It could lead to insufficient coverage if the per bottom limit is not adequately aligned with the vessel’s value, leaving gaps in protection.
SecureNow’s expertise can be utilized to navigate the complexities of marine policies, ensuring optimal coverage, competitive rates, and efficient claims handling.
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