Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

How is loss measured under ocean marine cargo insurance?

1. By the total value of the shipment

2. In terms of the percentage of insured value lost

3. By the market value of the goods

4. Based on the seller’s estimate of damages

The correct answer is: In terms of the percentage of insured value lost

In ocean marine cargo insurance, loss is measured in terms of the percentage of insured value lost, which reflects how much of the total insured value is compromised due to the loss or damage of goods during transit. This method ensures that the measurement is tied directly to the coverage limits of the policy, allowing for a more precise and fair adjustment of claims based on what portion of the total insured goods was affected. This percentage-based approach accounts for different types of losses—whether a full loss of the cargo or partial damage—and provides a structured method to evaluate claims accurately. It ensures that the insured party receives compensation proportionate to the loss experienced, adhering to the principles of indemnity, which is key in insurance practices. In contrast, measuring loss by total value could lead to different interpretations and might not reflect the actual impact on the insured's financial position. Similarly, basing it solely on the market value of the goods can fluctuate and might not align with the policy's terms and coverage limits. Lastly, relying on the seller's estimate of damages lacks objectivity and could be subjective, potentially leading to disputes regarding the claim amount.