Get to know the vital terms of Logistics and Supply Chain Management.
Free of Particular Average is a term under marine insurance that gives partial protection of cargo losses. Under an FPA policy, only partial losses due to specific serious marine incidents will be covered. The general cases that will normally fall under this criterion would include severe cases such as the sinking of the vessel, stranding, fire, or collision. Minor damages such as minor handling or contact with seawater are excluded from the coverage. FPA is a unique insurance cover that one can take out when one intends to insure against major risks without necessarily covering everything that may occur in terms of damage.
Limited Coverage:
Principal features of FPA, by and large, include minimal covers. It protects cargo against severe damage caused by major maritime accidents, excluding minor, regular risks. This means that minor cases, such as damages resulting from mere handling cases, are included.
FPA is normally created to cover disastrous events at sea. The incidents involved are usually the sinking of a ship, fires, or some collision that causes colossal damage. These are usually rare occurrences but could be very costly if they occur.
Risk Mitigation:
FPA is for shippers who are willing to accept some of the inherent risks in shipping but still require protection against disastrous of enormous proportions. It reduces overall insurance costs by leaving out minor losses and providing coverage for more serious issues.
It’s a good option for shippers if they have safety and transportation methods but still want to protect against huge losses. But if minor damage or handling is an acceptable risk, then FPA allows the shipper to save money on insurance while still being covered in case of major accidents.
In conclusion FPA, free of particular average, is a marine insurance that covers only major maritime incidents. It saves the shipper the cost of an insurance premium since some risks are merely borne for minimal damages.