Among so many important insurance terms, the meaning of insurable interest in marine insurance can be confusing for many. If you’re a new business owner or are simply here to understand the principles of marine insurance policy better, this article will help you understand the concept of insurable interest.
Simply put, insurable interest in marine cargo insurance means your reasons for buying marine insurance should be genuine and valid. If you’re planning to get your shipment or cargo insured, your interest should be vested in their safe arrival.
If your shipment reaches safely the intended destination, then it should be an advantage to you. Similarly, if your shipment is damaged, then it is against the interests for which you have purchased the insurance. This is called the insurable interest of the insured person, whose interests and profit are directly related to the safe arrival of the goods.
Interestingly, insurable interest does not necessarily be present from the beginning. Especially in the case of a marine open insurance policy, chances are that the insured may not have an insurable interest when the policy was purchased, but eventually becomes their matter of interest.
However, it is necessary to have an insurable interest in the shipment, especially at the time of a loss or damage to the goods to claim reimbursement.
This is common if there are several parties involved, or in case there is a change in ownership of goods involved. Insurable interest should have the following characteristics to be legally binding under a marine insurance policy:
These have been discussed with the help of some case scenarios later in the article.
PCS is a food products exporter from India delivering processed food items to the US worth millions of dollars.
While a majority of their goods are CIF, PCS has to bear too the cost, insurance and freight expenses until they reach the buyer in the US. In this case, PCS has an insurable interest in the goods till it has safely reached the US.
Once the goods have arrived and been transferred to the interested buyer, the insurable interest will not transfer to the buyer once they have confirmed the safety and quality of the goods received. In case of any damage to the goods after this transfer, the US buyer can file a claim up to the sum insured with the insurance company later.
Second Flight Logistics is a transport business dealing with the shipment of fragile items and operates throughout India. The company purchased 4 heavy-duty trucks and got them financed from 4 different banks.
Since these banks need the trucks to be insured, this can be done if:
Wrapping it Up
Having a marine insurance policy will secure the interests of the business persons involved, including the financers and sellers. Insurable interests ascertain that these claims are valid and all the parties involved can financially recover in case of a mishap.
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