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CARGO INSURANCE, Goods moving internationally face a very real risk of…
CARGO INSURANCE
INSURANCE SCOPE AND IMPORTANCE:
It originated in the Uk with the Elizabeth Act of Parliament in 1601.
Modern cargo insurance has expanded beyond the maritime domain to cover all forms of transportation, reflecting the complex logistics networks involved in international trade.
TYPES OF CARGO INSURANCE
Specific (voyage) policy: is a type of marine insurance policy that provides coverage for goods transported over water or air for a single voyage.
Open Policy: in marine insurance is a type of policy designed to cover multiple shipments over a specified period.
Two types of open policies:
Floating Policy: Issued for a specific value that decreases with each shipment until the total insured amount is utilized, requiring renewal.
Permanently Open Policy (More Common):
Provides coverage for an unlimited number of shipments over a set period, with the policy being subject to renew
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THE GENERAL AVERAGE PRINCIPLE :, IIt is defined as a principle whereby all parties involved in a sea voyage proportionately share the losses resulting from sacrifices of part of the ship or cargo to save the whole in an emergency
The scope of the General Average covers any deliberate action taken to ensure the safety of the vessel and its cargo that results in the loss or damage of some cargo or parts of the ship.
SELECTING PROCESS:
1- Selection of insurance: This involves choosing the right kind of insurance that covers GA contributions.
2-Declaration of General Average: Following an incident that necessitates extraordinary expenses or sacrifices, the captain or shipowner declares the activation of the process where all parties share the financial burden of the losses
3- Appointment of a General Average Adjuster: A General Average adjuster is appointed to assess the incident, evaluate the value of the goods.
4- Calculation of Contributions: The adjuster evaluates the value of the shipment.
5- Contribution by Parties: Parties involved need to contribute the losses based on the calculations
DISADVANTAGES: Time consuming and complex, it involves extra costs, GA can affect future access to premium insurance.
PRINCIPLES OF INSURANCE
A. INSURABLE INTEREST: It refers to the legal requirement that a policyholder must stand to benefit from the safe arrival of the goods or suffer a financial loss in case of their damage or loss
B. EXCHANGE RISK: When there is a fluctuation in the currency exchange rate between the time a deal is made and when payment is received. This can result in the home currency value of the payment being less than anticipate
C. CLAIMS PAYABLE ABROAD: Insurers will handle claims either at the overseas destination through an agent or in the country where the policy was issued, provided the claim is well-documented
D. INDEMNITY IN INSURANCE: is a core principle in most types of insurance, where the insurer promises to compensate the insured for the loss, placing them in the same financial position they were in prior to the loss
E. PRINCIPLE OF UTMOST GOOD FAITH: All forms of insurance are predicated on utmost good faith, which requires the insured to fully disclose all relevant information. Non-disclosure can lead to the policy being voided.
F. SUBROGATION IN INSURANCE: Subrogation is a principle in insurance that allows an insurer to pursue a third party that caused an insurance loss to the insured
G. Proximate Cause: Proximate Cause is a key principle in insurance claims that helps determine whether a loss is covered under the terms of an insurance polic
H. EXCLUSION IN INSURANCE POLICIES: Rather than listing all the covered risks, insurance policies often list the exclusions. Some of them are: delay, wear and tear, loss of liquids, etc.
Goods moving internationally face a very real risk of physical loss or damage, the exporter can arrange insurance coverage for all of these risk.
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