Legal Definitions - running policy

A running policy, also known as a floating policy, is a type of insurance contract designed to cover a fluctuating or unspecified quantity of goods or property over a period of time, rather than a single, fixed set of items. Instead of detailing every item at the time the policy is issued, the policy sets a maximum aggregate value. The insured then declares the specific items, their value, and sometimes their location or transit details as they come into existence, are acquired, or are shipped. This provides continuous coverage without the need to issue a new policy for each individual transaction or item.

• Example 1: International Importer

  A company that regularly imports various types of machinery parts from different manufacturers across Asia throughout the year might purchase a running policy. Instead of buying a separate marine cargo insurance policy for each individual shipment that arrives, this single running policy covers all their incoming goods up to a pre-agreed maximum total value for a specific period. As each shipment is dispatched from a foreign port, the company simply declares the specific goods, their value, and the vessel details to their insurer, and the policy automatically extends coverage to that particular consignment.

  This illustrates a running policy because the exact items, their value, and the specific vessels are not known when the policy is initially taken out. The policy "floats" over all future shipments, with details declared as they occur, providing continuous protection for the importer's fluctuating inventory in transit.

• Example 2: Art Gallery and Dealer

  An art gallery that frequently buys, sells, and consigns paintings, sculptures, and other valuable artworks has an inventory that is constantly changing. Pieces are often moved between the gallery, storage facilities, art fairs, and client homes for viewing. A running policy allows the gallery to insure its entire fluctuating inventory up to a maximum declared value. When a new piece is acquired, or an existing one is sold or moved, the gallery updates its internal records, and the running policy adjusts its coverage automatically to include the new items or exclude the sold ones, without requiring individual policies for each artwork.

  This demonstrates a running policy because the specific artworks covered are not static; they change over time. The policy provides flexible, ongoing coverage for the gallery's dynamic inventory, with the details of the covered items updated as the inventory changes.

• Example 3: National Logistics Provider

  A large logistics company transports a wide array of goods for numerous clients across the country on a daily basis, using various trucks and routes. Rather than obtaining individual transit insurance for every single truckload or package, they opt for a running policy. This policy covers all goods they transport within a specified period, up to a maximum declared value per consignment and an aggregate total for the policy term. The company reports the details of each consignment (type of goods, value, destination) as they are dispatched, ensuring continuous and comprehensive coverage for their diverse transportation operations.

  This is an example of a running policy because the specific goods, their values, and destinations are not fixed at the policy's inception. The policy provides a blanket of coverage for all future shipments, with the details being declared incrementally, allowing the logistics provider to manage risk efficiently for their high volume of varied consignments.