Open Policy

Open Policy is a long-term insurance contract in which the insurer (insurance company) and the insured (usually a foreign trade enterprise) agree in advance that, within a certain period (usually one year), automatic coverage will be provided for specific cargo transportation. Its core feature is that, during the effective period of the contract, for all shipments of goods falling within the agreed scope, the insured only needs to declare each shipment to the insurer after it is dispatched, and the insurer will automatically underwrite it according to the open policy terms, without the need for case-by-case negotiation of insurance. It is mostly used by enterprises that export or import frequently, and it can simplify insurance procedures, avoid omission of insurance, and enjoy preferential rates. Points to note: the insured must declare each shipment truthfully and promptly; otherwise, the insurer may refuse indemnity. The declaration content usually includes the vessel name, voyage number, sailing date, cargo value, destination, etc. An open policy usually stipulates the maximum limit, risks covered, rate, and declaration deadline. Differences from other terms: compared with the "specific policy" under which insurance is arranged shipment by shipment, an open policy provides automatic coverage and is valid on a long-term basis; it is similar to a "floating policy," but a floating policy usually has an aggregate insured amount limit, whereas an open policy has no aggregate insured amount ceiling and only requires declaration. In addition, under an open policy, the insurer generally issues an insurance certificate as proof for each shipment.