Marine Open Policy vs Open Cover
An open policy is a policy with a sum insured. An open cover is an agreement to issue policies.
A trader who ships once a year can buy one policy for that one shipment. A Ludhiana hosiery exporter who sends goods out every week cannot: by the time each policy is issued the truck has left. Marine cargo practice therefore offers annual arrangements that cover shipments automatically and settle the paperwork through declarations. The two the IC-11 syllabus pairs are the open policy and the open cover.
Both save the insured from arranging cover shipment by shipment, and both rely on the insured declaring every dispatch. They differ in one thing that drives everything else: an open policy is a policy with a sum insured, while an open cover is an agreement to issue policies.
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Open Policy vs Open Cover
What it is
Open policy (floating policy)
An annual cargo policy for a round sum insured
Open cover
An agreement by the insurer to insure all shipments within its scope, under which policies or certificates are issued
Sum insured
Open policy (floating policy)
Fixed, ordinarily the estimated annual turnover in transit
Open cover
No overall sum insured; only a limit per bottom (per conveyance) and the agreed terms of cover
How it runs down
Open policy (floating policy)
Each declaration reduces the sum insured until it is exhausted, then it is topped up or renewed
Open cover
Does not run down
Period
Open policy (floating policy)
Usually twelve months
Open cover
Usually twelve months, with premium on each shipment adjusted from a cash deposit the insured keeps with the insurer
Legal status
Open policy (floating policy)
Itself a policy
Open cover
Not a policy, so it is not stamped as one: each shipment needs a policy or certificate issued under it
Typical user
Open policy (floating policy)
Inland and import traffic with steady volumes
Open cover
Exporters and importers who need a certificate per shipment for the buyer or bank
| Open policy (floating policy) | Open cover | |
|---|---|---|
| What it is | An annual cargo policy for a round sum insured | An agreement by the insurer to insure all shipments within its scope, under which policies or certificates are issued |
| Sum insured | Fixed, ordinarily the estimated annual turnover in transit | No overall sum insured; only a limit per bottom (per conveyance) and the agreed terms of cover |
| How it runs down | Each declaration reduces the sum insured until it is exhausted, then it is topped up or renewed | Does not run down |
| Period | Usually twelve months | Usually twelve months, with premium on each shipment adjusted from a cash deposit the insured keeps with the insurer |
| Legal status | Itself a policy | Not a policy, so it is not stamped as one: each shipment needs a policy or certificate issued under it |
| Typical user | Inland and import traffic with steady volumes | Exporters and importers who need a certificate per shipment for the buyer or bank |
Clauses Common to Both
- Limit per bottom (limit per sending)
- The maximum the insurer will accept on any one vessel, conveyance or dispatch. If the exporter loads goods beyond this limit on one ship, the excess is uninsured unless the insurer agrees in advance.
- Location clause
- The maximum the insurer will accept at any one place before shipment, such as goods piling up at a port warehouse waiting for a vessel. The amount is agreed separately in the contract.
- Declaration clause
- The insured must declare every shipment as soon as it is known, even if a loss has already happened. The cover depends on declarations being complete, so omitting shipments is a breach the insurer can rely on.
- Basis of valuation clause
- Fixes in advance how each shipment's value will be worked out (invoice plus freight and insurance plus an agreed margin), so declarations are consistent.
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Other Cargo Policy Forms
- check_circleSpecific voyage policy: covers one named transit from one place to another, and ends when that transit ends. Inland transit is commonly written this way, for example under Inland Transit Clauses (B).
- check_circleAnnual turnover policy: covers all of a firm's transits (purchases, inter-depot moves, sales, exports) for a premium charged on sales turnover. The insured reports only monthly or quarterly sales figures, not each movement.
- check_circleSpecial declaration policy: the courseware's name for an open policy for large clients whose premium is provisional and adjusted on declared turnover. Insurers now sell variants of this as turnover or annual policies.
- check_circleSales turnover and duty covers: often added to open arrangements so that customs duty and increased value on imports are covered on the same declarations.
How IC-11 Tests This
The classic question: "which statement correctly distinguishes an open policy from an open cover?" Answer: an open policy has a fixed sum insured that is exhausted by declarations; an open cover has no overall amount and is an agreement, not a policy. Also expect what the limit per bottom restricts (any single shipment or conveyance) and what the location clause restricts (goods at one place before shipment).
FAQs
What is the difference between an open policy and an open cover?expand_more
An open policy is an annual policy with a fixed sum insured that is reduced by each declared shipment until exhausted. An open cover is an agreement with no overall sum insured under which the insurer issues a policy or certificate for each shipment.
What is limit per bottom in marine insurance?expand_more
The maximum amount the insurer will cover on any one vessel or conveyance under an open policy or open cover. Goods loaded above that limit on one vessel are uninsured unless agreed beforehand.
What is a floating policy in marine insurance?expand_more
Another name for an open policy: an annual cargo policy for a round sum that floats over many shipments, each declaration reducing the balance.
What is a specific voyage policy?expand_more
A cargo policy for a single named transit between two places. It suits occasional shippers; regular shippers use open policies, open covers or annual turnover policies instead.
Next steps
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