Open 'Cover: Open Cover is an insurance arrangement designed specifically to the need of those firms which have substantial import/export turnover and frequent transactions. Such firms are spared the inconvenience of negotiating insurance contracts every time the transaction is to be made. Main features of an Open Cover arrangement are as follows:
1) Unlike an insurance Open cover is not an enforceable contract instead it is an agreement under which the insurance company would honour and accept declaration of shipment of cargoes and issue stamped specific certificates of insurance against each
ii) Under an Open Cover arrangement, agreement between the insured and the insurer is reached about the subject matter (e.g., goods) insured, packing conditions, voyages, risks, covered, rates and other conditions of the cover. The insured can obtain insurance cover within these agreed conditions.
iii) No premium is charged when an Open Cover is issued, but the insurance companies usually require the insured to furnish either a bank guarantee or cash deposit towards payment of premium against each declaration, as declarations are made.
iv) The validity period of an Open Cover is twelve months.
v) It is customary to make an Open Cover agreement subject to two limitation clauses - Par Bottom and Per Place clauses. The effect of these clauses is to limit the liability of the insurance company to an agreed amount. Thus, if the loss in an accident is more than this amount, the loss will be partly recoverable upto the agreed amount. For example, in an Open Cover, if the limitation clause was for Rs. 10 lakhs and the loss was Rs. 20 lakhs, the insurance company will pay only Rs. 10 lakhs. voyages other than from to USA, the notice period for cancellation of war and Strikes risks is seven days and for shipments from to USA it is 48 hours.
vii) When the loss takes place, claim will be awarded with reference to insurable value calculated on the basis of c.i.f. plus ten percent.
viii)The duty of the insured is to declare each and every shipment as soon as known. Unintentional failure to report shipment will be condoned by the insurance company. However, if the insured does not will fully report shipments, the insurance company may hold the Open Cover null and void for all subsequent shipments.