Question

Mark has an ocean marine insurance policy with cargo coverage. The type and value of his cargo varies from one shipment to the next, so rather than having a set value for this coverage, the amount of his settlement is only determined after a covered loss. Mark's cargo coverage is written on a/an ________ basis.

Option 1:Mark's cargo coverage is written on a specific basis.
Option 2:Mark's cargo coverage is written on an open basis.
Option 3:Mark's cargo coverage is written on a valued basis.
Option 4:Mark's cargo coverage is written on a floating basis.

Answer 1

Mark's cargo coverage in his marine insurance policy is written on an open basis, allowing flexibility in coverage to match the varying values of his shipments.

Step-by-step explanation:

Mark's ocean marine insurance policy with cargo coverage is adaptive to the variable nature of his shipments, where the value of the cargo changes with each journey. This kind of policy accommodates fluctuating cargo values and is not locked into a predetermined amount. When a loss occurs, the settlement value is determined based on the actual value of the cargo at that time. Given these characteristics, Mark's cargo coverage is most accurately described as being written on an open basis (Option 2). An open policy is suitable for merchants who have varying levels of risk due to the changing nature of their shipments. Unlike a specific policy, which covers a specific amount and item, or a valued policy, which declares the value of goods at the outset, an open policy allows for flexibility in coverage based on actual value at the time of loss.