A floating policy in marine insurance is a specialised type of insurance policy designed to offer insurance for shipments of goods that happen regularly over a specified time, usually within a specific geographical area or trade route. This guide will pinpoint the key features and concerns of a floating policy in marine insurance.

Scope of Floating Policies:

A floating policy is a type of marine insurance policy that covers many shipments of goods rather than a single, specific shipment. It is also known as an open-cover policy. Floating policies are used to insure repetitive shipments, such as regular imports or exports between designated ports or regions. The policyholder (often a business) agrees with the insurer to cover all shipments made during a defined period.

Key Features of Floating Policies:

Open Cover Agreement:

The insurer and policyholder agree on the terms of coverage for a specified period. The policy remains open until either party decides to terminate it.

Automatic Coverage:

Under the floating policy, individual shipments are automatically covered without the need to notify the insurer before each shipment. This simplifies the administrative process for the insured.

Flexibility:

The insured has the flexibility to ship goods without having to arrange insurance coverage for each shipment separately.

Declaration System:

Periodically, the insured submits a declaration to the insurer listing the details of shipments made during that period. Premiums are then calculated based on these declarations.

Benefits of Floating Policies:

Convenience:

Eliminates the need to arrange insurance for each shipment separately, saving time and administrative effort.

Cost-Effective:

Often more cost-effective than insuring each shipment individually, especially for businesses with frequent shipments.

Streamlined Process:

Simplifies the insurance process by providing continuous coverage for all eligible shipments during the policy period.

Risk Management:

Enhances risk management by providing consistent coverage for shipments against various perils inherent in marine transport.

Considerations and Limitations:

Policy Terms:

The terms of the floating policy, including coverage limits, deductibles, and exclusions, should be carefully reviewed and understood by the insured.

Coverage Area:

The geographical scope of the policy should align with the insured’s shipping routes and destinations.

Declaration Accuracy:

Accurate and timely submission of shipment declarations is essential to ensure adequate coverage and premium calculation.

Termination:

Either party can terminate the floating policy with proper notice as per the terms of the agreement.

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