Insurable Value under British Marine Insurance Law

What Is Insurable Value under the Marine Insurance Act 1906?

Insurable value under the Marine Insurance Act 1906 is a legal concept that indicates the value used as the basis for evaluating the insurable interest in a vessel, freight, cargo, or other subject matter of insurance in marine insurance.

Section 16 of the Marine Insurance Act 1906 sets out how to determine the insurable value of a vessel, freight, goods or other subject matter insured, subject to any express provision or valuation in the policy.

In marine cargo insurance, invoice value, ocean freight, shipment expenses, premium, CIF value, sum insured, and amount of loss all appear. However, these terms do not all mean the same thing.

The insurable value is the value of the insurable interest as assessed for insurance purposes. In contrast, the sum insured is the amount agreed in the insurance contract representing the maximum liability the insurer will assume.

Additionally, for valued policies where the insurer and insured have mutually agreed upon a valuation stated in the policy, that valuation generally determines the insurable value, so the statutory calculation method under Section 16 may not be applied directly.

This article organizes the statutory valuation criteria of Section 16, valued and unvalued policies under Sections 27 and 28, the difference between insurable value and sum insured, and the relationship with underinsurance under Section 81.

Scope Covered in This Article

Item	Content Covered in This Article	Content Covered in Other Articles
Section 16	Statutory valuation standards for insurable values relating to vessels, freight, cargo, and other subject matter insured	Overall structure of the Marine Insurance Act 1906 and other major provisions
Insurable Value of Cargo	Relationship between the cost price of cargo, shipment expenses, incidental shipment costs, and insurance costs	Details on market value, replacement cost, and damage assessment for individual cargo
Insurable Value and Sum Insured	Legal and practical differences between Insurable Value and Sum Insured	Calculation of Sum Insured from FOB, CFR, CIF in the “Trade Terms and the Sum Insured” article
Valued Policy	Priority relationship between the agreed value on the policy under Section 27 and Section 16	Negotiation and determination of Agreed Value in individual insurance contracts
Unvalued Policy	Determination of the insurable value after loss under Section 28	Damage assessment, evidentiary materials, and individual valuation proofs
Underinsurance	Connection with Section 81 when the Sum Insured is insufficient compared to the insurable value	Details of underinsurance in the “Subrogation, Contribution and Underinsurance under the Marine Insurance Act 1906” article
CIF Value	Reasons why CIF value and statutory insurable value may not always be identical	Incoterms cost and risk transfer, and seller’s insurance arrangement obligations
Amount of Loss	Relationship between the insurable value and the basis for loss compensation	Individual calculations of total loss, partial loss, general average, salvage charges, salvage value, and repair costs

The existing “Trade Terms and the Sum Insured” article addresses how the Sum Insured is practically set based on FOB, CFR, CIF, and other contract prices.

This article focuses not on the calculation method of the Sum Insured itself but on the legal starting point under the Marine Insurance Act 1906 for how the value of the subject matter insured is evaluated.

Additionally, the existing “Subrogation, Contribution and Underinsurance under the Marine Insurance Act 1906” article covers the legal effects when the Sum Insured is lower than the insurable value. This article explains mainly the method for determining the insurable value as a prerequisite.

Purpose and Background of the System

In marine insurance, the value of the subject matter insured must be determined to assess the extent of the insurable interest, whether the Sum Insured is adequate, and the insurer's liability for total or partial loss.

However, marine insurance does not only cover cargo. Ships, freight charges, cargo, loading expenses, voyage-related expenditures, and other interests may each be individually insured.

Section 16 establishes the statutory valuation method that applies where the policy contains no express provision or agreed valuation.

This provision does not merely serve to confirm the market value of the subject matter insured. Depending on the type of insurable interest, the insurable value is determined by combining the value at the commencement of risk, total freight, cost of the goods, loading expenses, insurance premium, and other related costs.

On the other hand, when the parties have agreed on a valuation on the insurance policy, different treatments apply under Sections 27 and 28, depending on whether it is a Valued Policy or an Unvalued Policy.

Overview of Section 16

Section 16 Category	Subject Matter Insured	Basic Composition of Insurable Value	Valuation Timing	Main Practical Documents
Section 16(1)	Vessel	Vessel value, outfittings, ship supplies, prepaid wages, voyage expenses, and total insurance costs	At commencement of risk	Vessel appraisal report, classification data, equipment list, cost breakdown
Section 16(1)	Steamship	Hull plus machinery, boilers, fuel, and engine supplies owned by the insured	At commencement of risk	Vessel specifications, engine list, fuel and ship supplies records
Section 16(2)	Freight	Total freight amount exposed to risk by the insured and overall insurance costs	At the commencement of the risk, subject to the policy terms	Transport contract, freight details, Charterparty, B/L
Section 16(3)	Cargo / Goods	Cargo cost, loading expenses, ancillary shipping costs, and total insurance costs	At the time of shipment	Commercial Invoice, Packing List, freight and expense details
Section 16(4)	Other Subject Matter	Amount exposed to risk by the insured at the start of the insurance policy and associated insurance costs	At insurance policy commencement	Contracts, value documentation, expenditure evidence, insurance policy

Section 16 Is a Statutory Default Setting

Section 16 is not the only calculation method that automatically applies to all insurance contracts.

The provision assumes that an explicit stipulation on the insurance policy or a declared valuation is followed and sets out a basic method to calculate the insurable value only if these are absent.

Therefore, in practice, calculation does not begin with Section 16. Instead, the insurance policy, Schedule, Declaration, Endorsement, and applicable Clauses should first be reviewed to confirm whether a valuation method or an Agreed Value is specified.

If the insurance contract explicitly states a valuation method such as "Invoice Value plus 10%" or "CIF plus 10%," the relationship between that contractual valuation method and Section 16 should be clarified.

Insurable Value in Hull Insurance

In hull insurance, the basic standard is the value of the vessel at the commencement of the risk.

Section 16 adopts a structure that includes not only the value of the hull itself but also the value of equipment, ship supplies, provisions for the crew, wages paid in advance to the master and crew, and other expenses incurred for the voyage.

For steamships, the insured's machinery, boilers, fuel, and engine supplies may also be subject to valuation.

Moreover, the insurance costs covering all these items as a whole are added.

However, in modern hull insurance, factors such as vessel valuation, Agreed Value stated in the policy, hull insurance clauses, market fluctuations in vessel value, and additional value insurance are involved.

For practitioners handling marine cargo insurance for ocean-going vessels, it is more important to understand that Section 16 sets different valuation criteria depending on the subject matter insured than to focus on the vessel valuation calculation itself.

Insurable Value in Freight Insurance

In freight insurance, the insurable value consists of the total amount of freight at risk to the insured, plus the entire insurance premium for that amount.

Here, "freight" does not simply mean the freight amount stated on an invoice. Rather, it refers to the prospective freight earnings that the insured stands to lose if an insured event occurs.

It is necessary to confirm not only whether the freight is prepaid or payable later, but also who bears the risk of freight loss under the carriage contract.

The insurable interest differs between freight that has already been fixed and is non-refundable even if an incident occurs, and freight that can only be earned if the cargo reaches its intended destination.

Insurable Value in Cargo and Merchandise Insurance

Section 16(3) organizes the insurable value for cargo or merchandise as the cost price of the insured goods, plus shipping costs and expenses incidental to shipment, with insurance premiums added on the total amount.

The cost price of cargo generally refers to the fundamental value borne by the insured to acquire the goods.

Shipping costs and incidental expenses may include, depending on the contract and factual circumstances, inland transportation charges, export packaging fees, handling charges, port expenses, ocean freight, and other costs necessary for shipment.

However, not all expenses are added unconditionally. It is necessary to verify who bore the costs, whether they are already included in the invoice value, and whether they relate to the interest under insurance coverage.

Adding freight charges already included in the CIF or CFR value again results in double counting.

Main Components of the Insurable Value of Cargo

Item	Relation to Insurable Value	Verification Documents	Notes
Cost of Cargo	Basis for valuation under Section 16(3)	Commercial Invoice, Sales Contract, Purchase Records	Sale price and insured’s acquisition cost may not be the same
Export Packing Costs	May be included as expenses necessary for shipment	Packing Invoice, Work Details	Confirm whether already included in the product price
Inland Transportation Costs	May be incidental costs related to shipment	Truck Freight Charges, Collection Cost Details	Verify insurance coverage period and cost responsibility of insured
Port and Stevedoring Charges	May be included as expenses related to shipment	Port Fees, THC, Stevedoring Invoices	Avoid double counting if included in transaction price
Ocean Freight	May be included as a primary cost of cargo transportation	Freight Invoice, B/L, Quotation	May already be included under CFR or CIF value
Insurance Premium and Insurance Costs	Adds the overall insurance cost under Section 16	Premium Calculation Statement, Insurance Policy	Confirm contractual calculation method and circular calculation handling
Expected Profit / Valuation Uplift	May be added to Sum Insured under the contract	Insurance Policy, Underwriting Criteria, Sales Contract	Not necessarily identical with statutory insurable value under Section 16
Taxes and Customs Duties	May be subject to special agreements or individual insurance coverage	Import Declaration, Tax Payment Documents, Insurance Terms	Not automatically included in the usual cargo value

Insurable Value for Other Subject Matter

For subject matter insured other than vessels, freight, and cargo, the basic insurable value at the commencement of the insurance policy is the sum of the amount at risk for the insured and the insurance premium.

Which interest corresponds to the "amount at risk" depends on the nature of the insured item and the terms of the contract.

Expenses that may potentially occur in the future or costs that are not actually borne by the insured cannot simply be included in the insurable value.

Comparison of Insurable Value, Sum Insured, Agreed Value, and Market Value

Concept	English	Basic Meaning	Determination Method	Practical Role
Insurable Value	Insurable Value	The value of the insurable interest assessed under marine insurance	Section 16 or valuation method stated in the insurance policy	Basis for sufficiency of the sum insured and proportion of loss indemnity
Sum Insured	Sum Insured	The maximum amount the insurer is contractually liable for	Insurance application, insurance policy, and underwriting conditions	Sets the insurer’s maximum payment liability
Agreed Value	Agreed Value	The value mutually agreed by the parties on the policy under a Valued Policy	Explicitly stated in the insurance policy	Generally fixes the insurable value between insurer and insured
Invoice Value	Invoice Value	The invoiced amount under the sales contract	Commercial Invoice	Key reference in calculating cargo insurable value but not necessarily the insurable value itself
Market Value	Market Value	The trading value in the market at a particular time	Market data, appraisal, sales records	Relevant for loss assessment but does not always match calculation under Section 16
Amount of Loss	Amount of Loss	Economic loss actually incurred due to the incident	Survey, repair costs, depreciation, resale results, etc.	Determines payable amount based on insurable value, sum insured, and clauses

Valued Policy and Unvalued Policy

Sections 27 and 28 of the Marine Insurance Act 1906 distinguish between a Valued Policy and an Unvalued Policy.

A Valued Policy is an insurance policy that explicitly states the agreed value of the subject matter insured on the policy document.

Under Section 27, provided there is no fraud and subject to the other provisions of the Act, the value fixed by the policy is conclusive between the insurer and the insured as to the insurable value, whether the loss is total or partial.

An Unvalued Policy is an insurance policy in which the value of the subject matter insured is not predetermined on the policy. Instead, the Sum Insured serves as the upper limit, and the value is assessed post-loss according to the methods set out in the Act.

Comparison between Valued Policy and Unvalued Policy

Comparison Item	Valued Policy	Unvalued Policy	Relation to Section 16	Practical Notes
Value stated on the policy	Explicitly states the Agreed Value	Does not state the insurable value	Agreed Value takes precedence under a Valued Policy	Do not confuse Sum Insured with Agreed Value
Timing of insurable value determination	Agreed at the time of contract conclusion	Calculated after the loss event	Section 16 provides the statutory valuation basis for an Unvalued Policy	Retain supporting documents to prove value
Total loss and partial loss	Agreed Value generally determines the insurable value	Uses statutory calculation for the insurable value	Confirm the effect of Section 27	Exceptions apply in cases of fraud or specific provisions on the policy
Fluctuation of market value	Agreed Value remains basic even if different from market value at the time of loss	Value data under Section 16 is important	Presence or absence of agreement at contract time is decisive	Do not determine payment amount based solely on market price
Constructive Total Loss	Agreed Value is generally not decisive for CTL judgment	Check the criteria and calculated value under Section 60 and others	Beware of exceptions under Section 27(4)	Confirm if there are special provisions on the insurance policy

Important Exceptions in Valued Policies

The Agreed Value stated in a Valued Policy generally determines the insurable value for both total loss and partial loss cases.

However, in cases involving fraud, the agreed value may not be protected.

Furthermore, unless otherwise specified in the insurance policy, the agreed value on the policy is not necessarily the definitive amount for determining whether a Constructive Total Loss has occurred.

Therefore, it cannot be simply concluded that a Constructive Total Loss does not occur unless the recovery or repair costs exceed the stated agreed value of 100 million yen, just because the Valued Policy indicates that amount.

Relationship Between Insurable Value and Sum Insured

The insurable value and the sum insured are usually closely related but are not the same concept.

The insurable value is the valuation of the insurable interest. The sum insured is the contractual amount assumed by the insurer.

If the sum insured equals the insurable value, in principle the entire insurable interest is covered.

If the sum insured is less than the insurable value, underinsurance issues under Section 81 may arise, and the insured may be treated as its own insurer for the uninsured portion.

Conversely, when the total sum insured under multiple insurance contracts exceeds the recoverable amount, issues of double insurance or overinsurance may occur.

When the Insurable Value and the Sum Insured Do Not Match

Status	Insurable Value	Sum Insured	Main Legal and Practical Implications
Full Insurance	10 million yen	10 million yen	Basic condition where the entire insurable interest is covered
Underinsurance	10 million yen	7 million yen	The insured may bear 30% uninsured portion
Contractual Addition	10 million yen	11 million yen	Contractual coverage standards may include expected profit and other elements
Overlap of Multiple Policies	10 million yen	Total of multiple certificates: 20 million yen	When the same interest and same risk are covered, insurer coordination may be an issue
Insufficient Payment Limit	20 million yen	Certificate states 20 million yen, individual limit 15 million yen	Amounts exceeding the limit may become the insured’s own responsibility separate from the sum insured

Relationship with CIF Value

CIF represents the contract price under a sales agreement, including the cost of goods, insurance premium, and freight.

Therefore, the CIF value is an important reference when assessing the insurable value of cargo.

However, the CIF value and the insurable value under the Marine Insurance Act 1906 do not necessarily coincide in every contract.

The CIF value is the price stipulated in the sales contract, while Section 16 evaluates the insurable value based on the insured’s cost of the cargo, shipping expenses, incidental charges, and insurance costs.

In marine cargo insurance, it is common practice to set the sum insured at 110% of the CIF value, but this 110% is not a statutory insurable value mandated uniformly by Section 16.

The 110% addition is treated as a method for determining the sum insured, considering contractual coverage standards, anticipated profits, additional charges, and other factors.

Verification of Insurable Value under FOB, CFR, and CIF Terms

Contract Price Terms	Main Costs Usually Included	Additional Items to Consider When Confirming Insurable Value	Notes
FOB	Price of goods and seller’s costs up to loading on board the vessel	Ocean freight, insurance costs, and other loading-related costs payable by the buyer	FOB invoice value alone may be insufficient
CFR	Price of goods and ocean freight	Insurance costs and other incidental charges	Do not add ocean freight again
CIF	Price of goods, ocean freight, and insurance premium	Contractual uplift percentages, additional charges, and scope of subject matter insured	Do not equate CIF value with the Sum Insured
Other Contract Price Terms	Varies depending on Incoterms and sales contract	Costs actually borne by each party	Check not only the term but also the cost breakdown

Major Situations Where Insurable Value Becomes an Issue

Situation	Main Points of Concern	Reference Documents	Confirmation Purpose
At Policy Inception	Appropriate Setting of the Sum Insured	Invoice, Freight Charges, Insurance Standards, Premium	To prevent underinsurance
FOB Imported Cargo	Freight and Insurance Costs Not Included in the Invoice	FOB Invoice, Freight Invoice, Insurance Terms	To reconstruct the cargo insurable value
CIF Transactions	CIF Value vs. Contracted Sum Insured	CIF Invoice, Insurance Certificate, Uplift Percentage	To prevent double counting of costs already included
Valued Policy	Priority of Agreed Value	Insurance Policy, Schedule, Endorsement	To confirm whether Section 16 is directly applicable
Accidents under Unvalued Policy	Post-accident Proof of Insurable Value	Invoice, Cost Breakdown, Accounting Records	To determine insurable value and claim amount
Partial Loss Claims	Insurable Value and Damage Ratio	Survey Report, Values Before and After Damage, Sale Results	To calculate indemnity amount
General Average	Shortfall Between Sum Insured and Contribution Amount	General Average Notice, Cargo Value, Insurance Policy	To confirm responsibility for uninsured portion
Cargo Involving Multiple Invoices	Undeclared Cargo and Underinsurance	Invoice List, Packing List, Bill of Lading	To ensure all cargo values are insured

Items That Are Not Necessarily Immediately Included in the Insurable Value

Item / Scenario	Reason for Not Being Immediately Included	Additional Points to Confirm	Notes
Future Sales Profit	Profits separate from the cost of goods and shipping expenses under Section 16	Loading rate on the insurance policy, presence of profit insurance	Do not confuse 110% insurable value with the statutory insurable value
Import Duties	Responsibility for payment varies by time of loss and contract terms	Duty Insurance, special clauses, import declarations	Not necessarily automatically included in standard cargo insurance
Emergency Costs After Loss	May be treated separately as damage prevention costs rather than part of the insurable value	Applicable clauses, purpose of costs, insurer approval	Separate the pre-loss value composition from post-loss expenses
Increase in Market Price	In valued policies, the Agreed Value may take precedence	Policy type, market price at time of loss, contractual terms	Do not adjust insurable value solely based on market price
Re-inclusion of the Same Freight	May already be included in CFR or CIF value	Invoice composition, freight invoices	Avoid double counting
Costs Not Borne by the Insured	May not be included in the insurable interest or amount exposed to risk	Sales terms, party responsible for costs, contractual relationships	Do not automatically add third-party borne costs

Insurable Value Confirmation Flow

1. Identify the Subject Matter Insured
   Confirm whether the evaluation is for the vessel, freight, cargo, or other interests.
2. Check Explicit Provisions on the Insurance Policy
   Review statements regarding the valuation method, such as Agreed Value or Invoice Value plus a percentage.
3. Confirm Whether It Is a Valued Policy or Unvalued Policy
   Check if the insurable value is agreed upon in the policy.
4. Determine the Valuation Timing
   Confirm the reference time, such as when the risk commences, policy inception, or shipment time.
5. Verify the Cargo’s Cost Price
   Cross-check against the Commercial Invoice, sales contract, and purchase records.
6. Confirm Shipping and Incidental Costs
   Organize packing fees, inland transportation costs, port charges, handling fees, and ocean freight.
7. Check Insurance Expenses
   Confirm premium and other contractual insurance costs.
8. Exclude Costs Already Included in the Price
   Verify terms like FOB, CFR, CIF etc., to avoid double counting.
9. Confirm Contractual Addition Rates
   Distinguish whether additions such as 110% apply to the Insurable Value or to the Sum Insured.
10. Compare Insurable Value and Sum Insured
    Check for underinsurance or insufficient coverage limits.
11. Distinguish the amount of loss
    Separately organize insurable value, Sum Insured, Amount of Loss, and salvage value.
12. Consult Experts
    For high-value cargo, Valued Policies, General Average cases, or complex valuation, confirm with the insurer, Insurance Agent or Insurance Broker.

Typical Problem Cases

Case	Main Issue	Reference Documents	Key Points for Judgment	Initial Action
Insured only based on FOB invoice value	Omission of freight and insurance cost additions	FOB Invoice, Freight Invoice, Insurance Policy	Difference from the actual Insurable Value	Reconfirm Sum Insured before shipment
Freight re-added to CIF value	Double counting of costs	CIF Invoice, Cost breakdown	Whether freight is already included in the price	Recalculate value composition by item
Explained insurable value as 110% of CIF value	Confusion between Insurable Value and Sum Insured	Insurance Policy, Insurance criteria	Whether 110% is the contractually agreed Sum Insured	Explain statutory value and contract amount separately
Market value of Valued Policy dropped	Binding effect of Agreed Value	Insurance Policy, Valuation documents, Market data at loss time	Whether fraud or special clause applies	Do not change payment basis based on market price alone
Not declared part of multiple invoices	Underinsurance	Invoice list, Packing list, Insurance notification	Uninsured portion ratio and loss at incident	Cross-check all invoices
Cargo value increased before shipment	Additional processing cost, price changes	Change agreement, Additional invoice, Processing records	Whether increased before insurance inception	Notify insurer of increased value
General average contribution exceeds Sum Insured	Underinsurance and insufficient Sum Insured	General average notice, Cargo value, Insurance policy	Burden of uninsured portion	Confirm with insurer before guarantee procedure
Using Agreed Value policy to assess Constructive Total Loss	Exception under Section 27(4)	Agreed Value, Recovery costs, Repair costs, Policy wording	Whether agreed value is contractually used for CTL determination	Check special provisions in the policy

Example 1: Reconstructing the Insurable Value for FOB Cargo

Consider machinery cargo under FOB terms with a Commercial Invoice value of 8 million yen.

The buyer also bears marine freight charges of 600,000 yen, export packing costs of 200,000 yen, and insurance premiums of 20,000 yen.

Under the basic framework of Section 16(3), not only the cargo’s cost price, but also shipment expenses, costs incidental to shipment, and insurance costs should be confirmed.

In this simplified example, the insurable value would be considered based on 8 million yen, 600,000 yen, 200,000 yen, and 20,000 yen, totaling 8.82 million yen.

However, it should be verified whether each of these costs is already included in the invoice, whether the insured actually bears these expenses, and whether there is a different valuation method on the insurance policy.

If the contract sets the Sum Insured at 110% of the insurable value, the Sum Insured could be 9,702,000 yen; however, this 110% Sum Insured and the statutory insurable value of 8.82 million yen are not the same concept.

Example 2: Distinguishing between CIF Value and 110% Insurance Coverage

For cargo under CIF terms, suppose the CIF invoice value is 10 million yen, and the insurance policy specifies that the Sum Insured shall be 110% of the CIF value.

In this case, the Sum Insured will be 11 million yen.

However, it is not accurate to state that "the insurable value under Section 16 is automatically 11 million yen."

The CIF value of 10 million yen includes the cost of goods, freight, and insurance premiums as the transactional price. The additional 1 million yen represents the amount added to the sum insured according to the contractual insurance provision.

In the event of a loss, the CIF value, the contractually agreed value, the sum insured, and the applicable clauses should be separately verified.

Example 3: When the Agreed Value in a Valued Policy Differs from the Market Value

Assume that for an expensive machine, the Agreed Value under the Valued Policy is set at 120 million yen.

Even if the market value at the time of the loss has fallen to 100 million yen, provided there is no fraud and no other issues with the insurance contract, the agreed value of 120 million yen generally determines the insurable value between the insurer and the insured.

The insurer cannot unilaterally revise the agreed value to 100 million yen solely based on the market value after the loss.

However, when determining the occurrence of a Constructive Total Loss, Section 27(4) provides that the Agreed Value stated in the policy does not automatically constitute the decisive standard.

It is necessary to confirm whether the policy wording specifies different criteria.

Example 4: Underinsurance Due to Omission of Multiple Invoices in the Declaration

Suppose there are two invoices worth 7 million yen and 5 million yen respectively for cargo transported under the same B/L, but only the 7 million yen invoice was registered in the insurance notification.

If the insurable value, considering shipping costs and other expenses, is 12 million yen and the Sum Insured is 9 million yen, the insured proportion is 75%.

In the event of a partial loss of 4 million yen to the cargo, under the basic structure of the Marine Insurance Act 1906, the insurer would bear 3 million yen and the insured 1 million yen, which becomes an issue.

Even though the amount of loss of 4 million yen is below the Sum Insured of 9 million yen, because the insured proportion relative to the insurable value is insufficient, full compensation for the loss is not guaranteed.

The actual payment amount should be determined by confirming the insurance policy, applicable clause, whether the policy is valued or unvalued, deductibles, and individual policy terms.

Common Misunderstandings

Misunderstanding	Correct Understanding	Practical Considerations
Insurable Value and Sum Insured are the same	Insurable Value refers to the value of the insurable interest; Sum Insured is the contractual liability limit.	Record Insurable Value and Sum Insured separately.
The invoice value is automatically the insurable value	The insurable value may also include shipping costs, incidental expenses, and insurance premiums.	Confirm the agreed value basis and the party responsible for the costs.
110% of CIF value is the statutory insurable value under Section 16	The 110% often represents the contractual method for setting the Sum Insured.	Differ between statutory valuation standards and contractual addition rates.
Insuring only the FOB invoice value is sufficient	Ocean freight or insurance costs borne by the buyer may be missing.	Reconstruct the amount from FOB to the equivalent of CIF if needed.
Ocean freight should be added to CIF value	CIF value usually already includes the ocean freight.	Prevent double counting.
Even with a Valued Policy, the market value at loss is used	In principle, the Agreed Value stated in the policy determines the insurable value.	Check for fraud and any specific provisions in the policy.
Agreed Value always conclusively determines Constructive Total Loss	Section 27(4) generally excludes it as conclusive for CTL determination.	Review any special provisions in the policy wording.
If the amount of loss is less than the Sum Insured, full payment is always made	Underinsurance may mean uninsured proportions also affect partial losses.	Confirm the insured proportion relative to the insurable value.
When market value increases, the Sum Insured automatically increases	Sum Insured is the contractual amount and does not automatically increase.	Confirm arrangements for increase when cargo value rises.
All incidental costs can be added to the insurable value	It must be confirmed whether costs are borne by the insured and relate to shipment or the insurable interest.	Check the nature of the costs and who bears them.

Checklist for Judgment in Freight Forwarder Practice

Confirmation Timing	Counterparty	Items to Confirm	Actions When Problems Arise
When Receiving an Insurance Request	Shipper	Declared value, total invoice amount, currency, cargo quantity, and multiple invoices	If the value composition is unclear, obtain detailed breakdowns
When Calculating the Sum Insured	Shipper, Insurance Agent	FOB, CFR, CIF, freight, premium, and uplift percentage	Recalculate according to the contractual calculation criteria
When Reviewing the Insurance Policy	Insurance Agent, Insurer	Valued Policy, Unvalued Policy, Agreed Value, and Sum Insured	Correct if the stated content differs from the insurance application
Before Shipment of High-Value Cargo	Shipper, Insurer	Single shipment limit, insurable value, and individual approval	If the limit is exceeded, request additional underwriting
When Cargo Value Changes	Shipper	Price changes, additional processing costs, additional invoices	Increase the Sum Insured before transport starts
When a Loss Occurs	Shipper, Insurer	Insurable value, sum insured, amount of loss, salvage value, and deductible amount	Organize and submit each value separately
When Underinsurance Is Suspected	Shipper, Insurance Agent	Value under Section 16 and actual Sum Insured	Estimate the insured proportion and amount borne by the insured
When General Average Is Declared	Insurer, General Average Adjuster	Cargo value, sum insured, contribution value, and guarantee amount	Confirm the guarantee method for the uninsured portion
When Considering Constructive Total Loss	Insurer, Legal Specialist	Agreed Value, recovery costs, repair costs, and Policy Wording	Confirm Section 27(4) and contractual standards

Roles of Stakeholders

Stakeholder	Main Role	Information to Confirm/Provide	Notes
Shipper / Insured	Accurately declare the cargo value, trade term, and costs	Invoice, sales contract, cost breakdown, additional charges	Also declare costs and value changes beyond the invoice.
Freight Forwarder / NVOCC	Organize freight charges, transport segments, shipment costs, and transport documents	Booking, B/L, Freight Invoice, cost breakdown	Do not independently determine the insurable value; confirm with shipper and insurer.
Insurance Agent	Confirm criteria for calculating insurable value and sum insured	Insurance application, insurance policy, uplift percentages, underwriting terms	Explain the distinction between Insurable Value and Sum Insured.
Insurance Broker	On the insured's side, coordinate valuation methods and sums insured with the insurance market	Slip, Policy Wording, Agreed Value, Declaration	Clarify the terms of a Valued Policy.
Insurer / Underwriter	Decide valuation methods, Sum Insured, and underwriting limits	Cargo information, value data, insurance terms, incident details	Distinguish between contractual valuation methods and post-loss loss measurements.
Surveyor / Expert	Investigate cargo condition, amount of loss, salvage value, and market value	Photos, inspection results, repair estimates, sales outcomes	Not necessarily the final authority for legally determining the insurable value.
Legal Expert	Evaluate Section 16, Valued Policy, Underinsurance, and related issues	Insurance policy, contracts, value data, incident chronology	Early confirmation is necessary for high-value claims or when issues under English law arise.

Practical Points

When confirming the insurable value, first check the valuation method on the insurance policy or whether there is an Agreed Value clause.

For a Valued Policy, unless there is fraud or similar issues, the Agreed Value stated in the policy generally determines the insurable value between the insurer and the insured.

For an Unvalued Policy, based on Section 16, it is necessary to prove the cost of the cargo, shipping expenses, incidental costs, and insurance premiums after a loss occurs.

In marine cargo insurance, do not rely solely on the invoice value. Confirm the trade terms such as FOB, CFR, CIF, and who is responsible for which costs.

At the same time, be careful not to double-count freight or charges already included in the invoice value when adding costs again.

Furthermore, the insurable value, sum insured, Agreed Value, market value, and amount of loss are distinct concepts. In claim handling, these should not be treated as a single "cargo value" but managed separately.

Summary

Section 16 of the Marine Insurance Act 1906 establishes the basic methods for calculating the insurable value of ships, freight, cargo, and other subject matter insured, prioritizing any explicit provisions or valuation amounts stated on the insurance policy.

In hull insurance, matters include the value of the ship at the commencement of risk, equipment, stores, wages prepaid, voyage expenses, and insurance costs.

For freight insurance, the basis is generally the total freight amount exposed to risk by the insured and the insurance costs.

For cargo and merchandise insurance, the calculation is primarily based on the cost price of the goods, shipment expenses, ancillary costs related to shipment, and overall insurance costs.

Under Section 27 concerning Valued Policies, the Agreed Value stated on the policy generally determines the insurable value. For Unvalued Policies under Section 28, the insurable value is assessed post-loss using the criteria in Section 16, subject to the Sum Insured as the upper limit.

However, unless specifically stated otherwise on the insurance policy, the Agreed Value of a Valued Policy is not necessarily the definitive amount for determining the occurrence of a Constructive Total Loss.

The insurable value and the sum insured are distinct concepts. If the sum insured is insufficient relative to the insurable value, Section 81’s provisions on underinsurance may require the insured to bear the uninsured portion.

Insuring at a standard such as 110% of the CIF value reflects a contractual method of setting the Sum Insured, and does not automatically equate to the statutory insurable value under Section 16.

In practice, it is important to sequentially verify the insurance policy, valuation, invoice value, shipment expenses, freight, insurance premium, Agreed Value, and Sum Insured to prevent double counting and inadequate coverage.

The treatment of insurable value, sum insured, and Valued Policies varies depending on the insurance policy, applicable clauses, valuation, and the specific cargo and cost structure. For specific cases, please consult the insurer, Insurance Agent or Insurance Broker.