SUM INSURED V. INSURED VALUE
Although "Sum Insured" and "Insured Value" are used interchangeably in the marketplace, however, there is a difference in these two insurance terms academically.
"Sum Insured" is the amount "indicated" by the insured for information or estimation purposes and claims are not necessarily paid out based on such "indicated" value, even in a total loss situation.
"Insured Value" is the amount agreed upon between the insured and the insurer and claims would be settled based on such amount, in case of total loss. It may be deemed to be a "contracted" amount.
Having said that, in general, the claims would be paid out based on the value of the goods "at the time of the loss or perils", such as in the commodity trade where the price of a commodity, such as crude oil, coffee, metals and the like may be different each day.
OVER INSURANCE IS A SPECIAL FEATURE OF TRANSFERABLE DC
In a transferable DC situation, to match the higher price charged by the first beneficiary, the second beneficiary should cover say 180% of his own lower price of the goods. Therefore, technically speaking, "insured value" should be used to avoid troubles.
From UCP 500 point of view, "over insurance" (180% on 2nd beneficiary's CIF cost) should not be deeemed to be a discrepancy because this is a special feature of transferable credit.
BANKERS HAVE TO UNDERSTAND MORE ON CARGO INSURANCE IN ORDER TO DO THEIR JOBS WELL
That is also the reason why we strongly recommend bankers to wide their scope of knowledge in order to determine discrepancies "on its face" more accurately, safely, and convinsingly, although bankers such as Jeremy and Pavel may not agree.
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[edited 10/12/01 5:22:48 AM]