Unvalued Insurance

Unvalued insurance is a type of coverage in cargo transportation insurance where the insured value of the subject matter is not explicitly agreed upon at the time of application; only the insured amount is determined as the upper limit of compensation. In the event of a loss, the insurer indemnifies proportionally based on the ratio of the insured amount to the insured value, which is typically determined by the actual cost at the place of shipment plus freight, insurance, and other charges. It is commonly used when importers seek to simplify the insurance process or cannot accurately estimate the value of goods, often through open cover or open policy. Precautions: If the insured amount is lower than the insured value, the insured will receive proportional compensation and may not fully recover the loss; conversely, if the insured amount exceeds the insured value, the excess portion is invalid. The difference from valued insurance is that valued insurance specifies the insured value at the time of application, and compensation is based on the agreed value without re-assessment at the time of loss; unvalued insurance requires the insured value to be assessed at the time of loss, and the compensation amount may vary due to market fluctuations. Therefore, careful selection is advised for goods with stable or volatile values.