Floating policy

Floating policy,

Definition of Floating policy:

  1. Insurance cover for situations where the total insurable amount can be reasonably estimated but cannot be determined accurately-enough for computing correct premium, until the insurance policy comes to an end. For example, a trader will take a floating policy on a sum estimated to be large enough to cover shipments during a period (say, one year) and pays premium accordingly. As the shipments are sent out, the insurer is informed and the value of those shipments is deducted from the insured sum. This procedure is repeated until the insured sum is almost exhausted. The insurer then recomputes the premium according to the total value of the already-sent shipments, and adjusts it against the premium paid by the trader. At this stage the trader takes another floating policy and whole process starts over again.

Meaning of Floating policy & Floating policy Definition