Total Insured Value

Definition

Total Insured Value (TIV) is the total financial worth assigned to cargo for the purpose of obtaining insurance coverage. It represents the maximum payout the insurance provider will grant should the goods be lost, damaged, or destroyed while in transit. TIV is synonymous with the coverage limit provided by a specific cargo insurance policy.

Calculation Components

The TIV is not merely the commercial invoice cost of the goods. It typically includes the cost of the goods plus several related expenses necessary to prepare the goods for shipment. This calculation ensures that the shipper is compensated for direct loss and associated preparation costs.

• Cost of the Goods (Commercial Invoice Value)

• Packing and Handling Charges

• Other related expenses incurred in preparing the goods for transportation

Importance and Function

TIV is the foundational metric for determining the Cargo Insurance Coverage Limits. It is essential to ensure that the TIV accurately reflects the actual cost of the goods and related expenses. If the cargo is underinsured (meaning the TIV is set too low), the policyholder will only receive compensation up to the declared TIV limit, even if the actual loss incurred is significantly higher.

Expert Advice

Logicmile advises that shippers meticulously document and accurately calculate the TIV prior to policy issuance. Failure to accurately reflect the true cost of goods is a critical risk management error.

Always consult the specific terms of your policy. Many policies allow for the inclusion of a percentage buffer (e.g., 10% or 20%) over the simple cost of goods (known as Cost, Insurance, and Freight + percentage) to cover potential unforeseen expenses or anticipated profit margin.