What is total loss?
Total loss refers to the total loss of the entire or indivisible insured cargo or damage that can be regarded as total loss.
Total loss of a batch or indivisible insured cargo generally includes the following four situations.
①Total loss of the cargo stated in an insurance policy.
②Total damage to each type of cargo when the quantity and insurance amount of each type of cargo are listed separately under an insurance policy.
③Total loss of the entire cargo during loading and unloading.
④Total damage to the cargo shipped by barge when the cargo is shipped by barge. All losses can be further divided into actual total loss and constructive total loss.
Classification of all losses
All losses can be further divided into actual loss and absolute loss.
(1) Actual Total Loss
Actual total loss is also called absolute total loss. It means that the subject matter of insurance is lost after the occurrence of an insurance accident, or is severely damaged, completely loses its original body and utility, or cannot be owned by the insured.
The circumstances that constitute actual total loss are generally as follows.
① The insured object is lost. For example, the insured goods are burned by fire and all turned to ashes.
② The insured object is severely damaged and completely loses its original form and use value. For example, cement is soaked in seawater and forms a hard block, losing its original properties and use.
③ The loss of the insured object is irreparable, that is, the insured cannot make up for the actual possession, use, benefit and punishment of the insured object. For example, during wartime, goods are captured by hostile countries and distributed as spoils of war.
④ The ship is lost during voyage and no news is received for a considerable period of time.
(2) Constructive Total Loss
Constructive total loss means that after the accident of the insured object, although it is not completely destroyed, the rescue or repair costs are estimated to exceed the insurance value, so the goods are presumed to be a total loss. There are several types of constructive total loss.
① After the insured goods are damaged, the repair costs are estimated to exceed the value of the goods after repair.
② After the insured goods are damaged, the value of the goods will exceed the value of the goods at the destination.
③ The actual total loss of the insured goods is inevitable, or rescue is required to avoid the actual total loss, which will exceed the target value after rescue.
④ The insured loses the ownership of the subject matter due to an accident within the scope of insurance liability, and the cost of recovering the subject matter will exceed the value of recovering the subject matter.
(3) Partial Total Loss
In marine insurance, the total loss of the ship, whether it is an actual total loss or a presumed total loss, is measured by the entire ship, so the partial total loss is mainly for the cargo. In the marine cargo insurance clauses, the total loss of the cargo target is usually reduced to the smallest divisible unit of the insurance target to expand the scope of total loss compensation and provide more insurance protection for the insured.
For example, during the loading and unloading of goods or warehouse transportation, one or more losses of all goods are total losses. However, if the damaged goods cannot be divided by unit, the loss can only be a partial loss, not a total loss.
It should be noted that the insurer should clearly stipulate the scope of partial total loss in the insurance policy. At present, in the international market, marine insurers can be responsible for the following situations based on partial total loss.
① The same insurance policy carries more than two insured objects, one or several of which suffer losses;
② The same insurance policy covers more than two different goods, one or several of which are completely lost;
③ The same insurance policy covers goods with multiple bills of lading, and the goods on one or several bills of lading are completely lost;
④ Total loss when loading and unloading goods or transshipping;
⑤ When the goods are transferred by barge, all the goods on the same barge are lost.
(4) Arranged Total Loss
In some cases, the damage to the insured object is neither actual total loss or partial total loss, nor meets the requirements of presumed total loss. However, in order to maintain a good business relationship between the insurer and the insured and to establish a good reputation for the insurance company, both parties agree that if the insured object is compensated based on total loss, it will be more conducive to understanding the insurance contract and the development of the insurance business. Therefore, the insurer shall compensate the insured for the full insurance amount upon the request of the insured, which is the so-called arranged total loss. Strictly speaking, the arranged total loss does not mean that the insured object actually reaches the level of total loss, but is a way for the insurer to deal with certain loss compensation.
Abandonment of Total Loss
When a presumed total loss occurs, the insured may ask the insurance company to compensate for partial loss or total loss. If the insurance company can compensate for the total loss, it must pay (Abandonment).
Abandonment means that when the insured object is presumed to be a total loss, the insured transfers all rights of the insured object to the insurer and requires the insurer to compensate for the total loss. Whether the entrustment is established should meet the following conditions:
①The entrustment notice must be issued in time;
②The entrustment must be effective with the express or implied promise of the insurer;
③All the subject matter must be entrusted;
④No reservations.
Compensation for all losses
If the goods are actually completely damaged, the insurer shall make full compensation to the insured in accordance with the insurance amount recorded in the insurance contract. After the insurer makes full compensation, it obtains the ownership of the residual value of the insured goods. For example, the insurance amount of a batch of goods is 100,000 yuan. After the goods are burned and lose their original properties, the insurer shall compensate the insured 100,000 yuan, but the residual value of the burned goods after sale is 1,000 yuan. The insured can ask the insurer to compensate for part of the loss or the full amount. However, if the insured requires the insurer to compensate in full, it must issue a notice of entrustment to the insurer, and only with the consent of the insurer can it obtain full compensation from the insurer.
The above is the content related to all losses shared with sellers, I hope it will be helpful to sellers. LianLian Cross-border Payment provides professional and considerate services to allow users to conduct cross-border business with peace of mind, helping more users to bring excellent products and services to the global market in a more efficient way for better operation.