Most Restrictive Clauses under Marine Open Insurance

Marine insurance is no less than a safe haven for shippers and traders as it helps to safeguard against financial loss in case of any unforeseen event. The correct marine cargo insurance policy must be purchased depending on the nature, scope, and type of business. However, it is also essential to understand the various clauses under a marine open insurance policy for a better decision-making process.

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Marine Open Policy

International business transactions involve significant risks. The business is exposed to huge financial risks due to the import and export of goods. Marine open policy thus covers multiple numbers of transit journeys during the policy term. An open policy benefits large companies with high-volume trade, as buying an insurance policy for each transit may not be feasible.

It is also sometimes referred to as a floating policy. This type of policy generally covers all the transit of the insured till the policy is cancelled, ended or until the last payment realization, whichever is earlier.

Thus, the features of the marine open policy include:

  • Multiple transits during the policy term
  • Fixed sum insured
  • Coverage is decided as per the Limit per Sending
  • Coverage is decided as per the Limit per Location

In a marine open policy, it is also important to understand the clauses applied for cargo coverage. The coverage is mainly categorized into two:

  1. Institute Cargo Clauses: This clause provides coverage to cargo transits at the international level (between two countries).
  2. In-land Transit Clauses: This clause provides coverage to cargo transits within the country.

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Institute Cargo Clauses

Institute Cargo Clauses under marine open insurance policy cover goods or cargo in transit. These clauses mention the type of items that are covered in case of any damage or loss to the consignment. Institute cargo clauses usually cover everything, including the goods themselves, the container in which the cargo is placed, or, the vessel in which the shipment is being transported.

Clauses Under Marine Insurance

Institute Cargo Clauses were first developed by the International Chamber of Commerce, a global business governing body. These clauses were first announced in 1982 but have undergone profound changes due to changing business patterns, increasing global risks, and threats, etc.

Institute Cargo Clauses under marine open insurance policy serve a specific purpose. These clauses specify the terms that are covered and those that are not in case of damage or loss to the shipment.

There are three basic categories of these clauses: A, B, and C. The differences between these depend on the levels of restriction these clauses provide. Clause A is the widest of the three, and, Clause C is the most restrictive.

Similar to auto insurance, higher coverage is given on higher premium payments. The three clauses also function on parallel lines.

  1. Institute Cargo Clause A

    Institute Cargo Clause A provides you with the widest form of coverage. Also known as ‘All Risk’ cover, you need to pay a maximum premium for purchasing this policy. Clause A covers the cargo, goods, container, and, vessel. If there are any exclusions, they are generally mentioned under the General Exclusion Clause.

  2. Institute Cargo Clause B

    Institute Cargo Clause B is a bit restrictive; thus, the premium amount for this clause is moderate. All risks are not covered, and the shipper/trader can request the coverage of partial cargo or for valuable items.

  3. Institute Cargo Clause C

    Institute Cargo Clause C is considered the most restrictive type of coverage, making it the cheapest in premium payment. The coverage of risks under this clause is minimal.

    Each clause provides detailed parameters of its inclusions and exclusions. Due to the difference in cover, the premium payable also varies. It is to be noted that each institute cargo clause is reserved for goods in transit. Goods in transit are the goods that are departed from the loading location and are yet to reach the final destination. 

Conclusion

As a shipper or transporter, it is important to be informed about the Institute Cargo Clauses under marine open insurance. These clauses play a vital role in the purchase decision. The experts at Policybazaar can help clear doubts in order to make informed decisions about buying the right marine open policy for your business.

Written By: PolicyBazaar - Updated: 29 December 2022