Insuring your ship with good marine insurance is no longer an option, it is a necessity. With the huge volume of stuff in shipment during transportation, the risk of accidents, vessel damage, and other unexpected circumstances is undeniable.
Although there are exclusions in marine insurance, still insurance can be a lifesaver in such a crisis. This article aims to enlighten the readers about the difference between two popular losses policyholders often experience; Total loss and Partial loss.
Understanding the Concept of Total Loss
As the name sounds, Total Loss indicates a situation where the insured cargo is completely damaged. People with this kind of loss can claim a lump sum amount from their marine cargo insurance company.
It usually covers the entire value of that ship or cargo. However, exclusions in marine insurance can impact the coverage sometimes. Also, the total loss can be divided into two categories such as:
Actual Total Loss
Actual total loss means the insured property is entirely damaged or cannot be repaired or restored. A missing ship is the perfect example of an actual total loss.
Constructive Total Loss
Constructive total loss happens when the repairing cost of your property or shipping goods is more than their actual price. If the property or shipment goods still exist but are unusable, we can count them under the constructive total loss.
What is Partial Loss?
When a portion of a vessel or shipment of goods is damaged, we can call it a partial loss. Here, the marine cargo insurance company evaluates the damage portion and sets a compensation rate based on their evaluation. Similarly, partial loss can be categorised into two different types.
Particular Average Loss
Marine insurance in India provides coverage for different types of losses. This type of loss usually happens due to accidental damages or problems during the shipping. For example; some goods are missing from your ship due to a sudden robbery during transportation.
General Average Loss
General average loss takes place when the ship owner willingly sacrifices some parts of a ship to save the remaining ship. Here, the marine insurance coverage might get impacted due to unpredicted events. Discarding a cargo to save the ship during a natural disaster is a perfect example of general average loss.
Key Difference between Total Loss and Partial Loss
We hope the above-listed information has already helped you understand the basic differences between total and partial loss. However, it still needs some more clarification. Let us highlight the key differences between this total and partial loss and how they impact your marine insurance coverage.
Compensation
Marine insurance in India is more likely to pay a lump sum amount for total loss. In most cases, the insurance provider offers the entire price of the damaged vessel as compensation. So, if you are presently experiencing a total loss, you might expect your insurer to offer full coverage.
The compensation rate for partial loss primarily depends on the portions or goods that have been damaged. Although the lost or not lost clause in marine insurance might influence the compensation amount, still, the compensation rate can still be comparatively lower than the total loss incidents.
Types
There are two types of total losses Actual Total Loss and Constructive total loss. Although both these losses are valid for claiming full coverage, it still might slightly impact the clearance process.
Partial losses also have two categories: average loss and general loss. When it comes to general loss, the insurance provider might involve the stakeholders. Here, the marine insurance coverage typically depends on the circumstances associated with a general loss.
Responsibility
People who have experienced a total loss can count on their marine insurance. They are more likely to be completely insured by their insurers. So, financial support remains high for people who went through a total loss.
On the other hand, a partial loss might consist of sharing the loss with the stakeholders or the Cargo Company itself. It typically depends on the situation and damage severity.
Final Words
Marine insurance is vital for anyone dealing with cargo shipments. From small shipping businesses to giant transport leaders, everyone must insure themselves with a relevant insurance scheme.
With the right understanding of losses, one can easily understand how your claims can be influenced by different factors. For more clarity, we must differentiate between the losses and navigate how these losses can influence insurance coverage.