PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-6 | Types of Covers Part 2
Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 67, Maine Insurance Chapter 6 “Types of cover ” part 2 for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.
IC 67, Maine Insurance is a very important topic in insurance promotional exam. This IC 67, Maine Insurance paper comes in all GIPSA exams which makes it very important.
- “Increased Value” insurance
- This insurance is on increased value by reason of market value of the goods at destination on the date of landing, being higher than the CIF and Duty value of the cargo and is subject to the same clauses and conditions as the insurance on CIF value of the cargo, and to pay 75% of the actual loss suffered in the market or realisable value of cargo.
- This is not a valued policy as defined in the Marine Insurance Act.
- where the total sum insured under the CIF value insurance policy, Duty policy and all policies for Increased Values is less than the market or realis able value of the cargo in good condition at destination, the assured shall be considered to be his own insurer to the extent of such shortfall in the sum insured.
- The insurance shall not be for an agreed value but shall be for an amount not exceeding the actual difference between the market valueat destination on the date of arrival of the goods in India, and the total of CIF value plus Duty, subject to establishment of a higher market value or controlled price as notified by appropriate statutory authority.
- The assured is required to bear 25% of the claim amount payable under this component of the policy.
- Increased Value insurance shall not be granted for more than 100% of the CIF insurance, except in exceptional circumstances.
- The rate of premium shall be 100% of the normal rate applicable to CIF insurance.
- When the terms of sale are FOB, the insurance is arranged by the buyer overseas for his own account and benefit. Risk under the buyer’s policy commences on loading of the cargo on the overseas vessel, because it is at that juncture of transit that risk passes from the seller to the buyer.
- The seller or exporter, therefore, has to bear the risk of loss or damage to his goods from the time they leave his warehouse till such goods are loaded on the overseas vessel (Insurance of cargo sold on FOB terms of sale)
- Shut-out cargo: Shut-out cargo relates to goods which arrive too late for a vessel at a loading port or else the goods are not loaded because the vessel has a full cargo load.
- Goods which could not be loaded on the designated vessel for some reason or other and are therefore detained at the port warehouse or docks or shut-out mid-stream due to strike or lock-out, require further extension of cover at additional premium.( Shut-out cargo)
- When goods are returned to shipper’s warehouse involving Rail/Road transit, appropriate Inland Transit cover may be granted for the return journey at additional premium.( Shut-out cargo)
- Exports incentives insurance: Export Incentives policy provides for cover which is equivalent to:
FOB value + Export incentives +10%.
- If the loss occurs before shipment, the insurance company will pay loss on proportion of invoice value (Exports incentives insurance)
- Sellers’ interest contingency insurance: Sellers under FOB and C&F contracts may effect a contingency insurance to cover their interest, if the consignee refuses damaged goods or is unable to take delivery by paying for the goods because of insolvency.
- One method of covering these contingent risks is for the seller to effect a special contingency insurance called “Sellers’ Interest Contingency Insurance”, to cover all his FOB and C&F shipments.
- If the rejection of the shipping documents or of the goods is valid, the risk and ownership revert to the seller and he has to make alternative arrangements for disposing of the goods.
- If, however, such goods are lost or damaged, the situation is much worse for the seller – unless he has made provision for such contingency –because he will have the double handicap of an uninsured loss to unwanted goods.(Sellers’ Interest Contingency Insurance)
- The insurance itself still covers only the risks of physical loss or damage. The extra expenses incurred by the seller following a reversion of the goods to him are not covered.(Sellers’ Interest Contingency Insurance)
- Special storage risks insurance – (SSRI): The cover under the SSRI Policy takes into consideration the requirements of the consignor of goods, for insurance, to protect his goods during storage at destination railway yard or carrier’s premises, pending clearance by the consignees on termination of cover under an Open Policy
- Special storage risks insurance – (SSRI): cover may be granted to the consignor in conjunction with an Open Policy covering the transit of goods by rail or road.
- The salient features of the policy are as follows Special storage risks insurance – (SSRI):
- Risks: Risks under this Policy shall be similar to those under the Open Policy, except in case of SRCC risks, where riot, strike and malicious damage cover would be granted as per the provisions of the erstwhile All India Fire Tariff. Insurance shall be granted by a separate policy indicating the reference number of the corresponding Open Policy.
- Issue of policy: Policy may be issued to the consignor or the supplier of the goods only. Interest under the policy is not transferable.
- Duration of cover: Insurance under the SSRI Policy commences on expiry of 7 days reckoned from the midnight of the day on which the goods are discharged from the train/road vehicle and terminates at the time delivery is taken by the consignee or payment is received by the consignor, whichever is earlier.
- Location: Cover is granted on goods stored at Railway Yard or Carriers’ premises awaiting clearance by consignees on termination of cover under Open Policy. Storage in Port Trust premises is not covered.
- Period of Insurance: One year, corresponding to the Open Policy. Short term policies are not permitted.
- Sum Insured: As may be fixed by the client but not less than 10% of the estimated annual dispatches to be covered under the Open Policy, orRs.20 lakh, whichever is higher.
- Limit of liability any one location: As may be fixed by the insured, but not exceeding 10% of the Sum Insured under the SSRI or Rs.1 crore, whichever is lower.
- Payment of premium: Full premium is payable at the inception of the policy. No instalment or adjustment facility is allowed.
- Package policy under Duty Exemption Scheme: This is a package policy issued to exporters, who are granted an Advance License for import of duty-free items specified in the Duty Exemption Scheme, as incorporated in Chapter VII of the Export & Import Policy of the Government, for imports of duty free raw materials, parts, spares, etc. required for the purpose of export production.
- Package policy under Duty Exemption Scheme : Market value of the goods or Sum Insured, whichever is less, is the basis of indemnity.
- Package policy under Duty Exemption Scheme : Sum Insured under this Section shall stand reduced by the amount of loss paid unless pro-rata extra premium is paid to reinstate the Sum Insured.
- Package policy under Duty Exemption Scheme: The Sum Insured in respect of each Section of the Policy shall be asunder:-
- Section (a): Market value of the entire raw materials imported as perthe Licence.
- Section (b): As may be fixed by the insured but not less than 20% ofthe Sum Insured under Section (c).
- Section (c): Market value of the entire finished products to be exported under the Licence.
- Multi transit policy: To obviate the problem of multiple insurances, Multi Transit Policy is to be issued, which can cover transit+ storage/ process + transit under the same policy without any break in cover. This policy can cover processing also.
89 . Multi transit policy : The rating is as under: Basic rate for transit +50% (multi transit) + 0.01% per week or part thereof(Storage) / 0.03% for per week or part thereof (process).
- Stocks throughput insurance policy: The policy covers goods against physical loss or damage while in Insured’s control anywhere in the global supply chain, in transit, in storage as company owned inventory.
- Stocks throughput insurance policy : The policy combines traditional marine insurance and Fire & Allied perilsinsurance
- Stocks throughput insurance policy: The policy covers from the time raw materials are in transit up to delivery offinal goods to the buyer’s place, including all incidental and non-incidental storages.
- Sales turnover insurance: This is like an open policy but without any obligation on part of insured to make periodic declarations and pay the premium on value of goods in transit.
- Sales turnover insurance: In this policy there is no need to make periodic declarations as Full Annual Sales Turnover (or projected turnover) is covered for which the premium is paid in advance
- Sales turnover insurance : Policy can cover imports, exports, inland transits, inter-depot transfers, incidental storages and depending upon the need of client it may cover other Clauses like Seller’s interest etc. too.
- Marine (advanced) loss of profits insurance: Marine Loss of Profit insurance policy is to be issued in conjunction with project insurance policy. The policy covers Loss of Profits arising out of operation of insured peril, delay in the project giving rise to loss of profits
- Marine (advanced) loss of profits insurance: The policy basically covers delay in transit due to:
- Loss/ damage to cargo
- Loss/ mechanical breakdown/ damage to carrying vessel/ aircraft/ its machinery.
- Loss/ mechanical breakdown of any conveyance in which insured property is being carried, conveyance involved in general average (GA)or salvage charges (SC) or life-saving operations
- Marine (advanced) loss of profits insurance: i. There is no time limit anywhere and the cover is available up to property reaching final site.
- Time excess of 30 days.
- Indemnity for loss of profits.
- Cargo and other losses are not covered.
- Only one claim per project. All delays are to be combined, non-insured delays are excluded, and from that figure, excess of 30 days is excluded and the loss of profits for the balance days is paid
99. Marine (advanced) loss of profits insurance: Exclusions
- Loss / damage to property.
- Delay because of unreasonable withholding of guarantee.
- Buyer’s contingency insurance: The policy is reverse of Sellers’ Contingency Interest Insurance.
- Buyer’s contingency insurance The cover is available for imports on CIF, CIP (Carriage and Insurance Paid to) or other similar terms of purchase
- Buyer’s contingency insurance: Pre-shipment losses (concealed damages) which are not known at the time of shipment but are subsequently proved to have happened before shipment, are also covered
- Buyer’s contingency insurance Important conditions:
- Existence of insurance not to be disclosed to seller or other parties. This will not be deemed to be double insurance.
- Immediate notice of cover becoming effective.
- Subrogation against seller and third parties.
- As the risk is much less than normal marine insurance cover; premium ofaround 1/3rd of normal rates is charged
- Freight contingency insurance: For some bulk cargoes like timber, freight is payable only when earned (cargo reaches) on arrival.
- Freight contingency insurance Freight may be insured separately under this policy, but the cover attaches only on cargo discharged i.e. when the freight becomes payable.
106.Freight contingency insurance Total loss is not covered
- Freight contingency insurance Special features
- Cover is granted on annual basis.
- Policy contains Non-cancellation Clause, i.e. once the cover is taken, it cannot be cancelled by the insured.
- All shipments covered- no selection.
- No standard clauses are there for the cover.
- Generally there is 20% cap on liability (of value of goods).
- Increased Value insurance:
- This policy is different than the increased value insurance policy which iscommonly used in India.
- The policy is taken mainly for commodity trade where sales on high seas is very common.
- When during the voyage, the high seas sales take place and with successive sales, if the price of the commodity increases, the purchaser takes policy for difference in the value i.e. his purchase price and the amount of insurance policy assigned to him.
- In case of loss or damage, the final buyer will claim under all assigned policies and policy taken by him independently, if any.
- In case of over insurance, contribution condition applies.
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