To buy marine open policyBasis Of Valuation In Marine Insurance
- Author :
- TATA AIG Team
- ●
- Last Updated On :
- 31/05/2024
- ●
- 2 min read
In shipping and marine cargo insurance, the Basis of Valuation (BOV) refers to the method used to determine the insured value of stock/goods during transportation. This valuation determines how much you will be compensated for if the goods are lost or damaged.
The Marine Insurance Act (Section 22) provides a standard measure for insurable value: The prime cost of the insured goods, expenses related to shipping and handling and insurance charges for the entire shipment.
There can be exceptions if the insurance policy explicitly states a different valuation method.
You must note that the basis of valuation in marine insurance varies depending on the type of transit. Overseas shipments generally have a different BOV compared to inland shipments. Even within inland shipments, the BOV may differ based on the specific mode of transport.
Importance of Basis of Valuation in Marine Cargo Insurance
A Basis of Valuation (BOV) helps you receive fair compensation for lost or damaged goods during shipping. The valuation is the basis of a predetermined agreement between the shipment owner and the insurer on the worth of goods at the time of insuring them.
BOV helps streamline the insurance process and helps you receive the appropriate compensation.
How BOV in Marine Insurance Policy Benefits You
The Basis of Valuation in cargo insurance policy offers many advantages. Here is what you can expect.
Accurate Payouts: In case of a loss during transit, you will be reimbursed based on the agreed BOV. It minimises any disputes about the value of your goods.
Smooth Transactions: International trade generally relies on intermediary banks for payment processing. These banks require an insurance certificate mentioning the correct BOV (which is generally 110% of CIF value) before releasing funds. Without a clear BOV, there can be delays in payments, and sometimes, payment rejections may also occur.
How BOV Impacts the Claim Assessment
The chosen basis of valuation in marine cargo insurance impacts the claim settlement amount. The insured will only receive compensation for covered components as defined by the insurance policy.
-Section 67 (Extent Of Liability Of Insurer For Loss)
Section 67 explains the extent of an insurer's liability for loss. It states that the insured can recover up to the full extent of the insurable value, in case of an unvalued policy. For a valued policy, it is up to the full value fixed by the policy.
-Section 68 Total Loss
The passage deals with payouts for total losses in insurance policies. If the policy has a set value (valued policy), you get that amount. If the policy doesn't have a set value (unvalued policy), you get the actual value of the insured item.
-Section 71 Partial Loss of Goods, Merchandise
This section defines the compensation for partially lost or damaged goods. For valued policies, if part of the insured item is lost, the payout is a portion of the policy amount.
For unvalued policies, the payout is the actual value of the lost part. For any damaged goods delivered, the compensation is the item's value in good condition minus its value in a damaged state.
-Section 73 General Average Contributions and Salvage Charges
This section deals with insurance coverage for the General Average. It is shared to mitigate costs. If your insured item is fully insured for its contribution value, the insurer covers the full cost.
If the item is underinsured, the insurer pays a reduced amount based on the underinsurance ratio. If there is a Particular Average Loss cover, it is deducted from the insured value to determine their contribution amount.
Conclusion
Understanding the basis of the valuation of cargo insurance policy is essential to ensure your cargo has adequate financial protection throughout its maritime journey.
At Tata AIG, our marine insurance policy policies offer a variety of valuation options to fit your specific needs. We work closely with businesses to determine the most appropriate valuation method and provide tailored coverage that reflects the true value of your goods.
Don't let valuation ambiguities lead to underinsurance. You can contact Tata AIG today to discuss your requirements for marine cargo insurance and navigate the seas with peace of mind.
FAQS
What is the basis of valuation?
The Basis of Valuation refers to the method used to determine the insured value of an item in marine insurance. It affects the payout amount in case of loss or damage.
What is the basis of the valuation clause?
The Basis of Valuation clause in a marine insurance policy specifies the method used for valuation. It clarifies how much the insurer will pay for a covered loss.
Why do we add 10% in marine insurance?
Adding 10% to Marine Insurance has a reason. Sometimes, an additional 10% is added to the Cost, Insurance, and Freight (CIF) based on valuation. This accounts for potential extra costs, like estimated future charges or profit margin, for sufficient coverage.
What are the three types of marine insurance?
Three Types of Marine Insurance are as follows:
Hull and Machinery: Covers physical damage or loss of the ship itself.
Freight (Cargo) Insurance: Protects the goods being transported by sea against loss or damage.
Liability Insurance: Covers the shipowner's legal responsibility for accidents or damage to cargo, property or people.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
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