Page 16 - Insurance Times March 2017 Sample

10) There is a considerable saving of stamp duty because 4) Premium Rate: The details of premium rate chargeable
stamp duty of Re1 is affixed in the policy, which is valid under Open Policy /Open Cover are to be known
for 12 months. specifically, by the examinees.
5) Terms of Insurance: In order to ascertain the value of
Open Cover goods dispatched and utilization of sum insured, the
This is also a document of insurance issued in care of insured is bound to submit details of dispatches in the
export/ import where a trader is regularly exporting/ prescribed format to the insurance company. These
importing goods. Like open policy, here also insured need declarations may be sent weekly / fort nightly/
not approach insurer every time for each dispatch monthly/ quarterly/ half yearly.
separately. 6) Cancellation Clause: Since open policy is issued for a
year, it provides for pre-mature cancellation by either
The salient features of open cover are as under: side by giving one-month notice.
1) It is issued for export / import only.
2) It is not a stamped document. 3. Special Declaration Policy
3) It is not a legal document. 1) This is a special type of Floating policy.
4) Specific policies/ certificate of insurance are issued for 2) Issued to clients with a turnover more than 2 Crores.
each dispatch. 3) Issued for Inland transit only.
5) An open cover describes the cargo, the voyage and 4) Cannot be issued in joint names.
cover in general terms.
5) Policy cannot be assigned.
6) Like open policies it also offers automatic and
6) Proposal form is required.
continuous protection.
7) Policy is issued on the basis of turnover of previous year.
Important Clauses of Open Policy/ Open Cover: 8) Slab wise turnover discount is given.
1) Limit per bottom or per conveyance: It indicates the 9) Maximum slab wise T.O discount cannot exceed 50%
value of one shipment (single shipment) e.g. value of
goods at any place/ time which may become liability 10) Sum insured can be increased twice during the
of the insurer in the event of loss. currency of policy.

e.g. S.I. = 10 Crores 11) Periodical declarations are submitted by insured.
Limit per bottom = 10 Lacs 12) Insurance claim ratio is to be within 60%
Insured is not expected to exceed the limit per bottom, 13) If incurred claim ratio is more than 60% premium is
unless agreed to specifically by the insurer. loaded to bring down the claim ratio to 60%
2) Basis of Valuation: Basis of valuation is indicated to 14) For new risks, where previous year T.O is not known,
ascertain the components of sum insured. Normally the SDP can be issued but discount will be granted at the
value of the cargo includes prime cost of goods + freight time of completion of one year provided T.O is not less
+ other charges incidental to shipment + cost of than 2 Crores.
insurance plus 10-15% to cover profits. Profit can be
upto 25% depending upon case to case. 4. Annual Policy

3) Location Clause: The limit per bottom restricts the 1) This policy is issued for transit within India.
exposure of insurers to goods in transit. But sometimes 2) Policy is issued for transit by rail/road from specified
the goods in transit may accumulate at a particular depots/ processing units to other specified depots/
point e.g. goods being sent by sea may accumulate at processing units.
port of shipment awaiting vessel to arrive. In order to
restrict the liability, the insurers incorporate location 3) Cover is provided in terms of Inland Transit (Rail/Road)
clause - which specifically limit the liability of the clause.
insurers at a particular locations in the event of any 4) Premium rates are charged on the basis of value of risk
loss. In common practice the limit per bottom and limit at any point of time and distance between 2 points of
per location are same but there can be variation too. transit.

16 The Insurance Times, March 2017

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