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Deductibles in Cargo Insurance
In cargo insurance, you can often see the content of the deductible in the special agreement column on the policy. What is the deductible? What are the types of deductibles? Here's what you need to know about deductibles.
#1 Definition of Insurance Deductible:
The insurance deductible is the amount of loss that the insured must bear before the insurance company makes a payment according to the conditions of the insurance. Deductible clauses are widely used in all types of insurance because the deductible eliminates many small claims and reduces the cost of loss claims, thereby reducing premiums. The main purpose of the deductible is to reduce some frequent small compensation expenses, improve the insured's sense of responsibility and attention, avoid undue losses, and also reduce the operating costs of insurance companies.
#2 Classification of Insurance Deductibles:
Absolute deductible means: when signing an insurance agreement, both parties will formulate a fixed deductible amount. After an accident occurs, the insured must bear a certain amount of loss before the insurance company makes compensation. For example, if the contract stipulates that the absolute deductible is $200, the insurer will not compensate the loss below $200. If the loss exceeds $200, the insurer will pay for the excess. In freight insurance, most of them are expressed as a percentage. For example, the insured amount of a shipment is $10,000, and the deductible is 5% of the insured amount (that is, $500). The insurance company is not responsible for compensation; if there is a loss of 600 US dollars, the insurance company will pay 600-10000*5% = 100 US dollars, and the insurance company will only pay 100 US dollars, and so on.
This is a deductible often used in marine cargo insurance, where the deductible is expressed as a percentage or a certain amount. If the loss is lower than the specified proportion or amount, the insurer will not be liable for compensation; but when the loss is higher than the specified proportion or amount, the insurer will compensate the excess over the deductible. The difference between it and the absolute deductible is that the amount of the deductible is not fixed, but the deductible needs to be calculated through the agreed terms and the actual loss. The relative deductible is used in marine cargo insurance because the shipper can expect at least some small loss due to bad weather, the constant voyage of the ship and the frequent movement of the cargo, and because the property is occupied by the carrier and it does not have the Motivation for exaggerating losses, etc. For example: the special agreement stipulates that the deductible is RMB 1,000 USD or 5% of the loss amount, whichever is higher. If the consignment loses $100, the deductible is $1000 because 1000>100*5%. If the loss is $50,000, the deductible is $50,000*5%=$2,500, because 1,000<50,000*5%.
(1) When there are multiple ways of expressing the deductible in the policy, there is generally a sentence: which deductible shall prevail in the event of an accident. For example, there is an insurance policy that stipulates that the deductible is 10% of the loss amount or 50,000 yuan, whichever is higher. When adjusting the loss, it is necessary to calculate and compare the two amounts to see which deductible should be used for this accident.
(2) Some insurance policies have a deductible for each insurance subject. In this case, a sentence is usually added, that is, only one deductible is deducted for each accident, whichever is higher. When adjusting, look at the number of deductibles involved in the accident and deduct the highest one. If only one deductible is deducted for each accident, whichever is higher, it is possible that the sum of several deductibles involved in an accident may add up to a large amount. amount.
(3) There are many factors that affect the deductible amount of cargo insurance, including the characteristics of the goods, packaging, shipping method, value of the goods, age of the ship, ship registry, route, destination, etc., and the deductible clauses are also different. Therefore, you must negotiate with the insurance company about the specific deductible method before purchasing insurance to avoid unnecessary troubles after the accident.
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