Traditionally, under the “Marine Insurance Act”, Marine Policy (Hull & Machinery Insurance) covers the market value of the ship which refers to the Shipowners’ “insurable interest”. Any cover in excess of market value was prohibited. However, in the past century, shipowners has a demand for additional costs associated with a Total Loss event to be covered, for example, the sundries for the ship replacement. Therefore, the Insurance Market started to recognize that the assured has an additional insurable interest beyond the vessel’s market value and in excess of the sum of insured under Hull & Machinery Insurance.
Increased Value Insurance was instituted as an additional cover, commonly known as “disbursement”, which insures an additional of 20% to 25% over the Insured Value of the vessel in case of her Total Loss. Due to the likelihood of a total loss event is relative small by comparing with other risk elements in Hull & Machinery Cover, a lower premium level would normally be offered in Increased Value Insurance.
Therefore, nowadays many shipowners use Increase Value to cover the part of Ship’s market value in order to save the premium costs.
Sum of Insured
In practice, it is normally a 20% of the market value of the vessel or 25% of the Hull Value under Hull & Machinery policy.
Coverage
This insurance covers Total Loss (both Actual and constructive) against a list of peril insured which is the same as the period insured under Hull & Machinery policy. It also normally covers the below.
- General Average
- Salvage and Salvage Charges
- Sue and Labour Charges
- Collision Liability
Premium Rate
It is normally 50% of the Hull & Machinery rate in London Lloyd’s Market.
