CONCEPTS OF TRANSPORTATION INSURANCES
What is Transportation Insurance?
Transportation Insurance is a policy that covers all the property while it is in transit from one location to another by road, sea, and rail. It guarantees the cost of the goods which may be damaged or lost due to mishandling and other forms of damage during the transportation period. The details of the Insurance and its coverage depend on the general and special conditions and requirements of the relevant insurance.
Transportation Insurance guarantees both the shipping company and the insured’s property when the goods are transported from one location to another. All assets and tangible goods are covered by transportation insurance to prevent possible damage and losses during the transportation process.
What are the Types of Transportation Insurance?
Transportation Insurance is divided into several types depending on the types of goods and transportation. There may be various insurance coverages depending on the needs. Also, the final destination of the goods is important for the determination of the insurance types. In general, the types of transportation insurance are examined under 4 main headings. They are divided into types such as commodity transportation insurance, domestic carrier liability insurance, CMR insurance, Shipping brokerage liability insurance, boat and yacht insurance.
Commodity Transportation Insurance:
It covers the transported commodities during transportation period by all the means of transportation including sea, road, air, and rail. The Commodity Transportation Insurance which is established to protect goods and to cover the cost of the damages and losses of commodities guarantees the insured’s expenses. With commodity transportation insurance, attempts are made to prevent all damages and losses that may happen to the cargo, and at the same time, the company guarantees it in this regard.
The conditions covered by transportation insurance also vary depending on the type of coverage. The circumstances involved in this case are as follows;
Full Loss: It provides a guarantee against the risk that the goods will be completely damaged together with the carrier, resulting in a total loss of value. In other words, it is implemented when a situation happens to the vehicle where the transportation process is being carried out and all the goods are lost or damaged.
Limited Coverage: The type of coverage that provides a guarantee against partial risks such as the accidents the carrier vehicle may incur (for example, a ship runs aground, capsizes, a pirate raid and a conflict, vehicles crash, overturn, a collapse on the road, a creek overflow, a fire, etc.) In addition, fire and explosions are considered as a full loss of goods, and insurance is made.
Expanded Coverage: It covers all hazards regardless of vehicles such as ships, trucks, trains, or airplanes when they are made with wide coverage. In other words, when you take out wide-collateralized commodity transportation insurance, whatever happens to your goods, your damage is covered.
What are the Types of Transportation Insurance Policies?
When making commodity transportation insurance, policies are applied according to the type and scope of the product: They are divided into 4; Final Policy, Floating Policy, Subscription Policy, and Block (Subscription) Policy.
Final policy: It is issued to inform the insurer about all the necessary details of the shipment process before shipment happens. In other words, insurers must know in advance all the details of the transportation, such as the type of goods, insurance cost, type of packaging, quantity, date of loading, etc., and insurance should be made on the basis of this information.
Floating policy: If all the exact details and requirements about the shipment are not known in advance, the floating policy is applied in the accreditation process that banks are issued and when shipments to be made within a certain period of time are requested to be guaranteed.
Subscription policy: It guarantees all the shipments that will be made by a commercial company for a year. In the coverage of this insurance, one-time policies are issued for each shipment. Companies with a high frequency and capacity of shipment and companies that are believed to fulfill their obligations related to shipment notifications can benefit from this policy. It provides automatic coverage up to a certain limit, depending on the provision specified in the contract. It enables the insured to receive a refund of premiums when certain conditions are met and noted in the contract.
Block subscription policy: Although it is similar to the subscription policy, it is a type of policy that is organized on an annual basis and is organized for all transportation that will be made within a year based on the annual transportation turnover. The one-year plan is notified to the insurer in advance, and the total premium is calculated for all one-year transportation. In this way, the transportations made are secured without any notification obligation.
What is the Freight Forwarder's Liability Insurance?
This insurance type covers only the damage and expenses in the condition of the error or negligence that the transport company has. In other words, when the company has a mistake or negligence on the product, the company is responsible for paying all the costs and losses according to freight insurance. According to the agreement established by the coverage of insurance, all the losses and expenses can be paid by the insurance company directly to the insured company, or the transportation company may offer different services to the company to be able to recover the losses of the insured company.
What is the Valuable Item Shipment Insurance?
This insurance provides a guarantee against the risks that may arise when transporting cash, gold, precious stones, and similar valuable items from one place to another via any means of transport or mail.
During the shipment, the transport company or person that carries goods is responsible for all the goods. On the other hand, transportation companies have to take all the responsibilities against all the risk of damages and losses that will happen to the properties while they are transported from the company to the final destination. Valuable item shipment insurance should cover all the costs that may occur as a result of damages and losses during the shipment process.
In addition, this type of insurance provides guarantees in some cases such as armed robbery or extortion. In case of any accident or loss that occurs, the cost of the goods is calculated at the nominal value of the assets.
What is the Boat/ Yacht Construction Insurance?
It's a guarantee provided against possible damages during the manufacturing of newly built boats, before and while laying them on the stocks and during launching, as well as risks during delivery to the owner and cruising. In this way, yachts and boats can be protected against different types of risks and natural disasters. However, the following points should be considered during the insurance process: when there is no confirmation of the insurance company for the renovations or different operations that are performed on the boats/ yachts, these items are not considered as property that is covered on the insurance policy. That’s why the details of the terms of the agreement should be carefully examined.
What are the General Requirements of Transportation Insurance?
The general policies of the transport insurance are established according to requirements specified by the Insurance Association of Turkey. These are, in summary, as follows:
· When all the goods and properties are within the coverage of insurance agreement, have an accident such as a fire on a ship, a ship sinking, or the loss of goods, the products are insured, and all the damages are covered.
· In some cases (such as looting, seizure of products by law, detention, war,) insurance coverage varies, and insurance is made depending on the conditions.
· Losses or damages caused by strikes, labor unrest, and actions, as well as people who participate in illegal movements, are excluded from insurance.
· During the storage process, these problems aren’t considered in the insurance policy, when some cases occur such as damage caused by moisture formed in the warehouse while storing items, or damages caused by exposure to conditions such as rain and, rust.
· If there are combustible substances (for example gunpowder, matches, crude oil, dynamite, gasoline, etc.) among the other products which may easily burn and when some problems occur due to the combination of these products, insurance is not made even if these products are covered by insurance because this situation is considered as a certain carelessness and negligence
· When there is smuggling or prohibited items are transferred, insurance is not made, and such items are excluded from insurance coverage.
· Some problems that result from mistakes during the packaging process cause the products to be excluded from the insurance coverage.
· Insurance starts from the moment the goods are received by the carrier. Even if the products will not be transported immediately, the preservation process is also covered by insurance.
· Dissolution, opening, deterioration, or drying of the goods during the transfer is not covered by insurance.
· If any of the provisions of the insurance is acted contrary to good faith by the other parties, the contract may be deemed invalid by the other parties.
What situations does transportation insurance not cover?
Even though transportation insurance is made in many circumstances, there are some situations where transportation insurance is not covered, these are listed below:
· Illegal shipping operations such as clandestine trade and smuggling
· Non-compliance of transport conditions with the specified qualifications
· The occurrence of damage and losses due to radioactive products, atomic, flammable, and combustible products
· The deliberate damage that the insured person creates
· Occurrence of hidden defect-related damage to the insured property
· Loss of volume and weight in the insured goods
· Experiencing war and strikes
· Damages caused by the loss of solvency of those involved in the transportation process are not covered by transportation insurance.
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