Valued Marine Policy: What It Is and How It Works
Overview
A valued marine policy is a form of marine insurance that records a fixed, agreed value for the insured subject matter (for example, a ship’s hull or specific cargo). If a covered loss occurs and there is no fraud, the insurer pays the pre‑determined amount stated in the policy, avoiding post‑loss disputes about value.
Definition
- Valued marine policy: marine insurance that specifies a fixed sum as the insured value of the subject matter.
- Unvalued (open) marine policy: no fixed sum is agreed in advance; the insurer assesses and verifies value after a loss using invoices, estimates, and other evidence.
How It Works
- The policy document explicitly states the monetary value for the insured items (often using phrases like “valued at” or “so valued”).
- When a covered event results in loss, the insurer pays the agreed sum, provided contract terms are met and there is no fraud.
- This arrangement is especially clear in cases of total loss; treatment of partial losses depends on policy wording and claims adjustment provisions.
Example: A policy may state $1,000 per box of cargo. If a covered loss occurs, the insurer will pay $1,000 per box as specified — regardless of whether the actual market value per box at the time was higher or lower.
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Key Differences from Unvalued Policies
- Timing of valuation: valued policies fix value up front; unvalued policies require proof of value after loss.
- Certainty: valued policies reduce later disputes about insurable value.
- Market movements: valued policies protect the insured against falls in market value but prevent additional recovery if the insured item increases in value after the policy is issued.
Special Considerations
- Agreed value remains payable even if the item depreciates after the policy is issued; likewise, appreciation in market value does not increase the claim payout.
- Precise policy wording is critical. The presence of terms like “valued at” generally indicates a valued policy.
- Fraud exceptions and other standard policy conditions still apply.
- Many policies include references to maritime cost and liability frameworks (for example, the York-Antwerp Rules), which affect allocation of certain losses and expenses.
Legal and Historical Context
The distinction between valued and unvalued marine policies is rooted in longstanding maritime law traditions. For example, the Marine Insurance Act of 1906 (United Kingdom) formalized principles used widely in maritime insurance practice, including how insurable value and indemnity are measured under unvalued policies.
Practical Tips
- Check policy wording carefully to confirm whether it is valued or unvalued.
- Consider a valued policy if you want certainty about recoverable sums, especially during volatile market periods.
- Balance the benefit of certainty against the risk of under‑ or over‑insuring relative to future market values.
- Review clauses that govern partial losses, deductibles, and exclusions before purchasing.
Takeaway
A valued marine policy fixes the insured amount in advance, simplifying claims valuation and reducing disputes over value. It offers certainty but locks recoveries to the agreed sums, so precise policy wording and appropriate sums insured are essential.