Increased Value Clause in Marine Inland Transit Insurance
Traditional marine insurance policies estimate the cost of coverage on the basis of the market value. It means if a vessel is destroyed, the insured shall be entitled to receive the market value of the ship. However, there are several other expenses that are required to be met by the ship's owner. For example, the insured is expected to bear the sundries cost and office expenses in order to replace the ship with a new one. Therefore, the insurer is required to understand the need for increased value in marine inland transit insurance.
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Increased Value in Marine Inland Transit Insurance
Insurance companies are dynamic. They bring changes to harmonize with the requirement of their customer. To eradicate the issue of the additional cost associated with the new ship, the insurance company recognized the essence of increased value in marine inland transit insurance.
The increased value in marine inland transit insurance offers additional cover to the ship owner. It provides 20% to 25% additional cover of the total loss incurred by the insured. Therefore, the additional value shall be in excess of the market value of the vessels.
Benefits of Increased Value in Marine Inland Transit Insurance
Let us discuss some benefits of the increased value clause in marine transit insurance.
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Indemnification
The policy indemnifies the insured against a loss or damage suffered by the vessel. In addition, it offers increased value to the insured to deal with other costs associated with a new vessel.
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Statutory Authority
The increased value of the insurance must be established by the statutory body. The appropriate government shall be liable to determine the additional proportion or percentage to be offered to the insured.
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Eligibility
The increased value shall only be subject to the policy if the insured owns a cargo insurance policy.
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Issuance
The increased value shall be issued along with the cargo insurance policy. Therefore, if the insured wishes to avail of increased value, he must subscribe to the cargo insurance policy.
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Term and Conditions
The terms of the increased value shall be applicable as per the cargo insurance policy.
Case Study
Let us discuss a case study on the increased value in marine transit insurance.
- Since 1994, ABC enterprise is known for exporting electronic items from one nation to another. 60 per cent of the total export of ABC enterprises takes place via sea or waterways. Therefore, the company owns a ship in order to transport or export the goods.
- In 2022, the ABC enterprise was offered a contract to transport electronic items from Mumbai to Singapore. The ABC enterprises accepted the offer and loaded the goods for transportation. Due to a short circuit, the electronic items caught fire, which caused the devastation of the ship, and the electronic items.
- The ABC enterprise had a marine inland transit insurance policy. The company contacted the insurance company in order to settle the claim. The insurer appointed a surveyor to conclude the value of the loss.
- The insurance company settled the claim by providing the value of the ship. However, the ABC enterprise had to incur more costs associated with the new vessel. There was no increased value clause mentioned in the insurance contract. Hence, the enterprise could not claim an additional value of the ship.
- At the same time, XYZ enterprise also suffered a huge loss due to the fire. The ship caught fire which resulted in its devastation. The enterprise approached the insurance company. The surveyor was appointed who estimated the loss and damages caused to the ship. Further, the XYZ enterprise has an increased value in marine inland transit insurance policy. Hence, the company claimed the additional amount. The insurance company settled the claim by providing the total loss along with a 25% additional value of the insured vessel.
Conclusion
The traditional marine insurance policy offers the market value of the ship. However, it does not fall under the interest of the ship owner or insured. Therefore, the insurance companies realized the need for the addition of increased value in marine inland transit insurance policies. The increased value indemnifies the insured against the additional costs associated with the ship.
