Overview
“Per Bottom Limit in Marine Insurance”—also known as limit per sending, conveyance limit, or bottom limit—defines the maximum amount an insurer will pay for loss or damage occurring to cargo aboard a single vessel or conveyance in one incident. This limit helps insurers manage risk across multiple shipments and maintain financial stability under open cover policies.
Key Highlights
- Definition & Purpose
The per bottom limit sets a financial ceiling for the insurer’s liability pertaining to goods carried on a specific conveyance (e.g., a ship, aircraft, truck) in a single incident. It’s a central risk control measure in open marine insurance policies covering multiple journeys.
- How It Works
Each conveyance has its own maximum limit, even if the total value of goods exceeds that specified limit. For example, a limit per sending of ₹30 lakh on a container worth ₹50 lakh means the insurer will indemnify only ₹30 lakh in case of total loss.
- Context: Open Policy vs Specific Policy
- Open Policy: Covers all shipments during a policy term under pre-agreed limits, including per bottom and per location limits.
- Specific (Single Transit) Policy: Covers one shipment at a time, with its own limit per sending specified per voyage .
- Relation to Per Location Limit
In open covers, insurers often set a per location limit—the maximum exposure at any one location (like warehouse or port)—typically double the per bottom limit to manage stock accumulation risk.
Why It Matters
- Risk Management: Insurers use this limit to prevent high exposure if goods on a single conveyance exceed expected value.
- Adequate Coverage: Shippers need to ensure their per bottom limit matches the typical value of their shipments. Under-insurance may lead to claim shortfalls.
- Policy Compliance: Breaching the limit (often unknowingly) can result in reduced settlement or claim denial—as illustrated by real-life case studies where shipments exceeded per sending limits.
“Per bottom limit” is an important feature of an open-cover marine insurance policy. An open marine insurance policy describes the cargo, voyage, and insurance cover in general terms. It will naturally take care of all the shipments which fall under its scope. Issued for 1 year, this policy is renewable annually, and either the insured or insurance provider can cancel it upon giving notice. So, an open cover is a promise to ensure the security of future shipments about which specific details are not available in the present times. This open-cover marine insurance policy is useful for those who make large exports and imports regularly. Such as import/export merchants, banks, buying agents, contractors, shipping firms, etc.
The open-cover marine insurance policy would have a “Limit of liability” which is an agreed condition. According to this, the insurance provider agrees to the maximum sum insured and would not be liable for any shipment where the sum assured exceeds the agreed limit. “Limit of Liability”, is further based upon various factors such as the ones mentioned below.
- Per bottom limit
- Location limit
- Conveyance
- Voyages and cargoes
Per the Bottom Limit Explained
The “per bottom limit” states the maximum amount for which your insurance provider would be liable in case of claims. This is the maximum anticipated value of the cargo on a ship and any value which is above this limit is not intended to be covered under the marine insurance policy unless amendments are being made to the policy along with prior information to the insurance provider. This rule is applicable when the goods are in an ordinary transit course.
The maximum amount that would be provided by your insurance provider must be a figure larger than the shipment’s actual value. Usually, it’s a thumb rule that the limit of the policy would be twice the size of a large shipment. This is because there is a huge possibility of two shipments sending in the same conveyance or arriving at the destination together, etc. The term “per bottom limit”, was used in old times. It mainly refers to the bottom of the ship or the hull of the ship. Nowadays, the term “Conveyance limit”, is quite commonly used and can refer to any conveyance means like roads, rail, air, etc.
Hence, the “per bottom limit” is also known as the “sending limit” and the premium of the marine insurance policy is also calculated based on its sending limit as well.
Pros and cons of “Per bottom limit” feature
The “Per bottom limit” feature of an open cover marine insurance policy offers several advantages. It provides clarity and certainty by setting a specific coverage limit per vessel, ensuring adequate protection. It simplifies administration as multiple vessels can be insured under a single policy. It allows for flexibility in insuring vessels and accommodating changes in the fleet. It offers better risk management as the maximum liability for each vessel is clearly defined. Overall, it provides efficient and tailored coverage for marine risks.
While the “Per bottom limit” feature of an open-cover marine insurance policy offers advantages, there are potential disadvantages. It may result in higher premiums if vessels with higher values are insured. It could lead to insufficient coverage if the per-bottom limit is not adequately aligned with the vessel’s value, leaving gaps in protection.
SecureNow’s expertise can be utilized to navigate the complexities of marine policies, ensuring optimal coverage, competitive rates, and efficient claims handling.
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FAQs
Q) What is the per bottom limit in marine insurance?
A) It defines the maximum amount an insurer will pay for cargo carried on a single conveyance (e.g., a vessel or transport unit) in one incident.
Q) Why is the per-bottom limit important in open marine policies?
A) This limit helps insurers control liability for each conveyance shipment under open policies that cover multiple consignments over time. It also safeguards insurers from high-value losses.
Q) What happens if a shipment’s value exceeds the per bottom limit?
A) If cargo value exceeds the limit, the insurer pays only up to the limit, and the excess loss must be borne by the insured. Verification of compliance is critical to ensure full coverage.
Q) How is per bottom limit different from per location limit?
- A) Per Bottom Limit pertains to cargo on one conveyance.
- Per Location Limit caps the insurer’s liability for goods at a single location (e.g. port or warehouse), often set at twice the bottom limit in open cover policies.
Q) Should shippers choose open policy or single transit (specific) policy?
- A) Open Policy: Ideal for regular shippers—covering multiple shipments under a single policy.
- Specific Policy: Best for one-off consignments, with limits defined per single transit.
Q) How can claim disputes arise due to per bottom limit breaches?
A) Insurers may refuse or limit claims if the insured overrides the limit per sending—such as declaring shipment value beyond permitted limit—inadvertently breaching policy terms. Real cases report claims denied because limits were exceeded unknowingly.
About The Author
Simran
MBA Insurance and Risk
With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.
