Today we’ll continue to discuss about cargo insurance. As we mentioned in our previous article we’ll approach such important issues as clauses of the insurance agreement, term of validity of the insurance agreement and factors which influence the underwriting rate.
Personal experience
Financial Director of miracle movers, Toronto movers – we conclude insurance agreements with insurance cover, which depends on cargo types and conditions of delivery. For example, according to ordinary marine policy war risks and strike risks are excluded from the standard cover. That is why in order to extend the standard cover it is necessary to use additional clauses, namely Institute War Clauses and Institute Strikes Clauses, which cover these risks. It goes without saying that cost of insurance policy increases in this case with 0.03-0.05%.
Executive director of miracle movers, corporate moves – special clauses are often used in the insurance agreements. For example, in case of insurance of log or lumber transportation we bear responsibility for changes in cargo qualitative characteristics caused by humidity. In case of insurance of the cargo which needs special temperature conditions, standard agreement clauses, as a rule, do not provide compensation for temperature risks. Such compensations may be included in the agreement for additional charge.
Term of validity of the agreement
Insurance agreements differ according to the term of their validity. Standard for any insurance company is single insurance agreement, which is concluded for certain transportation and is valid from 30 up to 60 days from the day when money are transferred to the account of the insurance company. Within this term the insured party must forward to the insurance company documents, confirming that transportation has been completed (invoice, contract with shipping agent) or documents justifying why transportation has been postponed or impossible. In this case the insurance company will refund money paid as the insurance premium, retaining only a commission stipulated in the agreement. Otherwise the agreement is considered invalid and insurance premium is not refunded. That is why miracle movers, professional office movers advise you to be serious about the terms of delivery.
In case of periodical shipment of homogeneous lots it is more convenient to conclude general insurance agreement for all these shipments (usually it is concluded for a period of one year with possibility of renewal). Such agreements provide for cargo name, mode of transportation, insurance rate, terms of payment and other details of the agreement. General agreement sometimes may contain clause that insurance company apply multiplying or reduction factor to the amount of insurance compensation, in case when terms of shipment changed. Miracle movers, Toronto movers conclude such agreements for their regular corporate customers.
Insured person informs the insurance company about each shipment (the communication mode is stipulated in the agreement) in the day of cargo dispatch, and within 24 hours the insurance company issues policy for concrete dispatch and makes out the invoice for payment of the insurance premium. Periodical payment of the insurance premium is possible when money is transferred, for example, monthly. In this case such named "bordereau", which are drawn up for each payment, are attached to the agreement instead of policies. Insurance company may offer 30 % discount from the insurance cost to the clients concluding agreements for one year. Miracle movers, corporate moves negotiate maximum discount for their regular corporate clients.
Further miracle movers, professional office movers will describe factors which influence the underwriting rate (insurance premium).
The underwriting rate, which must be paid to the insurance company, depends mainly on cargo type, route and transportation mode. Basic index for calculation of the insurance premium is the cargo cost, stated in the agreement, invoice or price-list of the manufacturer.
Insurance company takes into consideration all possible risks during cargo transportation. It is considered that more times cargo is reloaded, higher is the risk and the insurance price. That is why in order to reduce the price of insurance client should submit documents confirming that cargo will be in safety and the risk of occurrence of the insurance event is very low. Documents must contain statement that cargo is packed qualitatively, is protected and is shipped using corresponding vehicle (for example for flowers transportation a special refrigerator is necessary). For more veridical estimation of cargo transportation safety underwriter may apply to surveyors.
It is possible to reduce the insurance price by the means of franchise agreement. It is reasonable to use franchise in case when insured person considers that collection of evidence will be much more expensive than the amount of compensation (i.e. in case of minimal losses it is senseless to obtain compensation). Such condition is often used, for example, for glass transportation insurance (small damages anyway appear, but it is not reasonable to prove them).
It is also possible to reduce the amount of insurance premium when cargo is insured for a sum smaller than its real cost. In this case insurance contribution also decreases, but if the insurance event occurs, the compensation amount reduces proportional to the insured cargo cost.
In our next article we’ll discuss how to obtain the insurance.
