Final answer:
Total losses in maritime insurance include Actual Total Loss, Constructive Total Loss, and Arranged Total Loss, each relating to the extent of damage or cost of salvage outweighing the value of the cargo or vessel.
Step-by-step explanation:
Shippers and cargo owners often protect against losses by insuring their cargo. When it comes to maritime shipping, there are different types of total losses that can be insured. Here are three types:
- Actual Total Loss occurs when the cargo is completely destroyed or so damaged that it is no longer recognizable as the item of shipment. This can happen due to events like fires, explosions, or sinking of the vessel.
- Constructive Total Loss is when the cargo has not been completely destroyed but the cost of salvaging the cargo exceeds its value. This might occur if a ship runs aground and the cost to refloat and repair it is greater than the ship's value.
- Arranged Total Loss refers to instances where the shipowner deliberately abandons the voyage and seeks compensation based on a constructive total loss. This scenario typically requires approval from the insurer and is less common.