Marine insurance is basically a type of insurance policy that offers coverage against any damage or loss that are caused to cargo vessels, ships, terminals, etc. or any sort of thing in which goods are transported from one place to the other.
You just need to know that if the problem is marine-related then marine insurance has certainly got your back. Open cover and open policy are two types of marine insurance.
What is an Open (Floating) Policy?
An open policy is a marine insurance policy that is distributed to cover many of the shipments or dispatches for a period 12 months based on the sum that is insured sufficiently large and adjusted against the value of each cargo in a reducing balance method.
Many traders who have regular dispatches are the ones who show great interest in taking the benefit of the open policy.
What is an Open Cover?
An open cover is a type of marine insurance policy where the insurer complies to offer coverage for all cargo that is shipped during the policy period. It is provided to the firm’s that are in the marine business.
The most common takers and usual buyers for open cover insurance are the firm’s that make regular shipments because they don’t have to keep on buying a new policy each time that a shipment is made thanks to the blanket coverage.
The insurance policy for open cover can be either a renewable policy or a permanent policy. It becomes a renewable policy when each shipment is individually covered and it becomes a permanent policy when several shipments are covered.
How does Open Cover Work?
Open cover policies are mostly put to use for international trade and mostly used by firms that usually deal with high volume trade over long periods of time.
Marine insurance is taken by a company for its own good only because marine shipping involves lots of uncertainty and risks.
These uncertainties can be a lot of things like damage to cargo from loading or unloading, weather problems, infestation, capsizing or sinking, piracy, etc.
A renewable policy is opted by companies when they think that they won’t be diving into marine activities that often and thanks to the renewable policy if needed they are able to renew the policy after it expires.
Due to this, they are able to renew the open cover policy for every voyage.
On the contrary, many marine companies go for a permanent policy for a particular time period if they are to make many voyages in that time period.
What’s different about the permanent policy is that it doesn’t require you to negotiate a contract for each shipment, rather it covers all voyages under that time frame. It is also known as blanket coverage since it only requires some specific details to be notified before one sets off for the voyage.
The insured in an open cover insurance policy must voluntarily educate the insurer about all the risks that are involved and make him understand.
How does Open (Floating) Policy works?
An open policy works in a way in which it offers automatic and regular insurance cover to a frequent exporter or an importer.
The traders are the ones who are responsible for dealing with regular domestic dispatches, these traders are also benefited by the open policy.
The premium that is paid under the open policy should always be paid in advance on the projected sum insured. Moreover, the projected sum that is insured must be at least four times the single carrying limit or per bottom limit.
As per the terms of the open policy, the insured is bound and has to declare each and every shipment without any exceptions.
Furthermore, the adjustment of the premium and sum insured are done based on the submission of every single declaration. Also, the sum that is insured as part of the open policy can be improved four times in a year.
Faulty declarations or omissions can be corrected even after the loss or arrival only if those omissions or errors were genuine. In addition to this, a refund of the premium on the unadjusted sum insured is allowed to the insured once the policy expires.
Difference Between Open Cover Policy and Open (Floating) Policy
As we know in the open cover policy the insurance provider is willing to offer cover for all the cargos that are in line for being shipped during the time frame of the policy. On the other hand, in an open policy, you are offered cover for an unspecified number of requirements that might pop up in future.
An open policy is an agreement between two parties, the insurance provider and the policyholder about offering cover for goods that are being transported for the agreed time frame.
Let’s now take a look at some of the main differences between the two policies.
|Open (Floating) Policy||Open Cover Policy|
|The open policy in most cases is for an agreed amount against which several declared consignments will be dispatched. This is the reason why the sum that is insured is reduced slowly every time an amount is declared until the sum insured is completely empty.||An open cover policy is made to help the companies that especially have some big transactions to make related to import and export.|
|The open policy in most cases is for an agreed amount against which several declared consignments will be dispatched. This is the reason why the sum that is insured is reduced slowly every time an amount is declared until the sum insured is completely empty.||Thanks to the open cover policy the companies don’t have to make insurance agreements every time they make a transaction as they can do a significant number of transactions within a specific time frame.|
|The open policy is duly stamped as it is an enforceable contract.||The agreement made in the open cover policy between the insurance provider and insured is about the goods insured, packing conditions, voyages, cover rates, risks covered, etc. The insured is able to claim an insurance cover within these conditions that have been agreed upon.|
|You can cancel your open policy by submitting a written notice before 15 days of cancellation.||The open cover policy has a validity of 12 months only.|
|From its date of issue, the open policy will no longer be of any use after one year but, know that the sum insured can exhaust before or after the policy expires.||You can cancel the open cover policy by submitting a written notice before 30 days.|
Frequently Asked Questions (FAQs)
Q- What is the difference between open cover and open policy?
A- The open policy is a stamped document and is, therefore, legally enforceable in itself, on the other hand an open cover is unstamped and has no legal validity unless it is backed by a stamped policy or certificate of insurance.
Q- What is an open cover insurance policy?
A- The open cover is a contract for 12 months which gives the insured regular protection to cover huge number of shipments or dispatches and the premium of which would be adjusted from the respective cash deposit account which is maintained by the insured.
Q- What is the open cover?
A- Open cover is a type of marine insurance policy in which the insurer agrees to offer coverage for all cargo that is shipped during the policy period.
So to sum it all up, with an open policy you can cover an unspecified number of requirements in the future, while on the other hand, with an open cover policy you are able to enjoy a blanket coverage for your continuous business and you don’t have to buy a new policy every time a shipment is done.