What is the Accumulation Clause in Marine Insurance?
The accumulation clause is a common provision in marine cargo insurance policies that limits the insurer's financial responsibility if the insured value of your cargo or vessel unintentionally exceeds the declared amount. Think of it as a safeguard for the insurer where unforeseen circumstances lead to a higher total value on board than initially anticipated.
This protects the insurer if delays or additional cargo push the shipment's value beyond the initial declaration. Understanding this clause empowers policyholders to manage expectations and take necessary steps for complete protection.
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Applications for Indian Marine Insurance
The accumulation clause finds application in various marine insurance policies:
- Cargo Insurance: This clause is relevant for situations where the total value of cargo or the vessel and its contents exceeds the declared amount. This can occur in cargo insurance due to delays, changes in the route, or consolidation of shipments at a specific location.
- Hull Insurance: The accumulation clause safeguards against situations where the total value on board (TVOB) of a vessel, including cargo, surpasses the declared insured value.
- Protection against Losses from a Series of Events: The accumulation clause can also protect against losses arising from a sequence of unfortunate events during the insured period. This is particularly beneficial for longer voyages or complex journeys with multiple stops.
Example of Protection against Losses from a Series of Events
A shipment of leather goods insured for ₹30 lakh was being transported from Kolkata to Antwerp via Dubai. The policy had an accumulation clause with a 120% coverage limit for the entire journey. During the voyage, the following events occur:
- A minor fire onboard the vessel in the Red Sea damages a portion of the cargo, causing a loss of ₹5 lakh.
- While docked in Dubai for customs clearance, the remaining cargo suffered water damage due to a freak storm, leading to a further loss of ₹8 lakh.
With the accumulation clause in place, the insurer was obligated to cover the combined losses up to the 120% limit (₹30 lakh * 120% = ₹36 lakh). This ensured the policyholder received compensation for the total loss incurred throughout the journey.
Examples of Loss due to Negligence of Policy Clauses
An electronics exporter in Delhi typically ships containers valued at ₹40 lakh each. Their policy has an accumulation clause limiting coverage to 115% of the declared value per shipment during a single voyage. Due to bad weather, they decided to consolidate two containers into one, with a total value of ₹80 lakh. However, they neglected to inform the insurer about the updated value.
During the voyage, an unfortunate incident led to the loss of the entire shipment. When the exporter filed a claim, the insurer only agreed to compensate up to the limit specified in the accumulation clause, i.e., ₹46 lakh. The remaining ₹34 lakh, which represented the value exceeding the insured amount, was not covered by the insurance.
Conclusion
As a policyholder, understanding the clause's impact on premiums, coverage limitations, and mitigation strategies empowers you to make informed decisions. By negotiating effectively and maintaining open communication with your insurer, you can secure the right level of coverage at a reasonable cost. Visit Policybazaar.com and connect with an expert to understand the accumulation clause in detail, assess your needs, and get recommendations for the most suitable marine insurance policy for your business.
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