Forms
1. Specific voyage policy:
A voyage policy covers the risks that may rise during a journey from one specific place to another. The terms and conditions of the insurance are set out in the appropriate ILU (Institute of London Underwriters) and other clauses.
These clauses cover mainly the perils covered under the policy as well as conditions related to the insurable value and claims according to the Indian Stamp Act.
ADVERTISEMENTS:
Each policy must be stamped. The stamp duty is recoverable from the insured. For creating transferability, the policy is required to be assigned by blank endorsement by writing ‘for and on behalf of followed by the name of the insured (e.g exporting firm and the signature of the director or partner).
The insurance policy comprises of the “MAR” Policy form, which contains no insurance conditions and the Institute Clauses (A, B or C and War and Strike Clauses) which contain insurance conditions.
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It must be noted that Duration Clauses, which provide warehouse to warehouse cover, are part of the Institute Cargo Clauses.
Hence, unless specifically deleted, the warehouse-to-warehouse cover is deemed to be effective. In this way a Voyage Policy also becomes a Time Policy.
2. Open cover:
Open Cover is an insurance arrangement designed specifically to meet the needs of those firms which have substantial import/ export turnover and frequent transactions.
ADVERTISEMENTS:
Such firms are spared the inconvenience of negotiating insurance contracts every time the transaction is to be made. Main features of an Open Cover arrangement are as follows:
i) Unlike an insurance policy, Open Cover is not an enforceable contract. Instead it is an agreement under which the insurance company would honour and accept declarations of shipment of cargoes and issue stamped specific certificates of insurance against each declaration.
ii) Under an Open Cover arrangement, agreement between the insured and the insurer is reached about the subject matter (e.g. goods) insured, packing conditions, voyages, risks covered, rates and other conditions of the cover. The insured can obtain insurance cover within these agreed conditions.
ADVERTISEMENTS:
iii) No premium is charged when an Open Cover is issued, but the insurance companies unusually require the insured to furnish either a bank guarantee or cash deposit towards payment of premium against each declaration, as the declarations are made.
iv) The validity period of an Open Cover is twelve months.
v) It is customary to make an Open Cover agreement subject to two limitation clauses, Per Bottom and Per Place Clauses. The effect of these clauses is to limit the liability of the insurance company to an agreed amount.
Thus, if the loss in an accident is more than this amount, the loss will be partly recoverable upto this agreed amount. For example, in an Open cover, if the limitation clause is for Rs 10 lakh and the loss is Rs 20 lakh, the insurance company will pay only Rs 10 lakh.
These two limitations are imposed to reduce the risk of the insurance company. In the case of the Per Bottom Clause, cargo of the value exceeding the agreed amount should not be carried in one carrier.
Similarly, under a Per Place clause (also known as Location Clause), cargo exceeding the agreed amount should not be accumulated at one place.
It must be understood that according to Indian insurance practice, the effect of the Per Place Clause is not confined only to pre-shipment accumulation of risk; it applies also to similar accumulations at the destination
vi) An Open Cover may be cancelled by either party by giving 30 days notice in writing. This stipulation does not cover War and Strikes risks for ocean voyage. For ocean voyages other than from/ to US the notice period for cancellation of War and Strike risks is seven days and for shipments from/to US it is 48 hours.
vii) When the loss takes place, claim will be awarded with reference to insurable value calculated on the basis of CIF plus ten per cent
viii) The duty of the insured is to declare each and every shipment as soon as known. Unintentional failure to export shipment will be condoned by the insurance company. However, if the insured does not wilfully report shipments, the insurance company may hold the Open Cover null and void for all subsequent shipments.
3 .Open policy:
Also known as Floating Policy, it has much in common with the Open Cover. This policy benefits clients with a substantial turnover and a large number of dispatches. Thus, it covers a series of consignments with all stipulations of the Open Cover, except that:
i) Open Policy is an enforceable contract of insurance and is hence duly stamped.
ii) Open Policy is for an agreed amount, against which a series of consignments may be dispatched and declared as a result of which the sum insured will gradually diminish by the amount of each declaration until it is finally exhausted.
iii) Even through the open Policy ceases on expiry of one year from the date of its issue, the sum insured is of paramount importance. Therefore, the sum insured may exhaust prior to the expiry of the policy.
iv) Open Policy is subject to cancellation by either party after giving 15 days’ notice of cancellation in writing.