CREDIT, BURGLARY AND MARINE INSURANCE

CREDIT INSURANCE

Credit is a system of buying and selling without immediate payment being made. It is a system whereby the buyer receives goods or accepts services in return for his promise that payment will be made on or before a specified time. This form of insurance tends to protect the seller against loss due to inability or unwillingness on the part of the buyer to pay for goods sold and delivered to him, or service rendered on credit terms. By this policy, the seller ensure that if his debtor fails to pay, he can recoup at least part of his money. The seller could be protected up to seventy percent (70%) to ninety percent (90%) but not 100% to make him an insurer of himself in order to be very careful in granting of credit. Credit insurance excludes hire purchase business considered to be the legitimate field of the banking sector and members of public because of the difficulties in the assessment of such risk. It deals with the normal trade involving sales and delivery of goods and provision of services.

The major factors which the insurer takes into consideration before granting this form of cover are:

1. The credit worthiness.
2. Whether the business is soundly run, etc.

 

USES OF CREDIT INSURANCE

1. It protects the asset of a trading organisation.
2. It restores the working capital lost through bad debt.
3. It serves as a defence for dividend maintenance.
4. It reinforces credit control management through information made available by the insurer to establish those losses that can be avoided by the policy holder.

 

BURGLARY INSURANCE

Burglary Insurance policy provides financial compensation against loss or damage to property contained in the insured premises by acts of burglary (theft accompanied by actual forcible entry or exit by violent means).

Burglary insurance policy covers property contained in the insured premises, stocks/goods owned by the insured or held in trust and/or commission. It also covers cash, valuables, securities kept in a locked safe or cash box in locked steel cupboard on specific request.

 

MARINE INSURANCE

Marine insurance covers the part of the sea losses which may result from fire, theft, collision and some other perils. It is a branch of insurance which covers loss or liabilities relating to ship and their cargoes against the damage or peril of the sea. It is probably the oldest form of insurance. This policy is compulsory in international trade so that all goods passing through the sea including the ship must be covered.

 

TYPES OF MARINE RISK

Marine insurance policies are arranged to cover marine losses associated with the peril of the sea which are fire, collision, and theft.

The insurance of property in marine insurance may be considered under the following headings:

1. Hull marine insurance: This relates to insurance of the actual vessels and its machinery. It is an annual policy with the insurable value to be the value of the ship at the commencement of the risk in addition to the insurer charge.
2. Cargo marine insurance: This covers loss or damage to goods carried by the ship. It is arranged for the duration of voyage which may include war risks. This form of insurance is usually from port of departure (warehouse) to port of arrival. The insurable value is the cost of the goods based on market value.
3. Freight marine insurance: The term “freight” in railway means “cargo” (i.e goods being transported) but in marine, “freight” is the cost of transporting the goods carried by the ship or hiring of a ship. It therefore provides financial compensation in respect of amount paid as transportation fees for goods shipped or hired ship which will be lost following the destruction of the ship or goods by the sea perils.

The main types of cover available differ in accordance to the period for which the insurance operates.

1. The time policy: This arrangement in marine insurance insures the ship, cargo and freight for a period of time not exceeding 12 months.
2. Voyage policy: This arrangement only covers a period of the voyage i.e. it covers from the port of departure to the port of arrival. For example, from London to Apapa in Nigeria.
3. Mixed policy: It is the combination of time policy and voyage policy. The subject matter of insurance is covered for a voyage and period in port after arrival.
4. Floating policy: In this form of marine policy, a large initial sum is granted and each time shipment is sent, the insured declares this and the value of the declared shipment will be deducted from outstanding sum insured. It reduces administration expenses in the sense that only one policy are issued instead of issuing separate policy for every shipment.
5. Small craft: It provides comprehensive cover for those using small boats for leisure purpose. This policy covers a wide range of peril.