Total Loss Only Insurance

What Does Total Loss Only Insurance Mean?

Total loss-only insurance is coverage that applies only if the insured property suffers a complete loss. It is commonly used in marine insurance and offers a more affordable alternative to regular hull insurance. This type of coverage helps shipping companies avoid significant financial burdens in the event of major catastrophes. Shipowners typically buy it alongside broader commercial marine insurance when they want catastrophe protection without paying for partial-loss coverage they are unlikely to claim.

Insuranceopedia Explains Total Loss Only Insurance

Occasionally, ships are lost at sea along with their cargo. Additionally, accidents or other unfortunate events on board can completely destroy either the cargo or the ship itself. For example, a fire on board could consume the entire cargo.

Total losses are rare, which is why total loss-only insurance is significantly cheaper than other forms of insurance. However, in the event of a total loss, without insurance, the company could be liable for millions of dollars in losses. Companies that ship goods often pair this kind of hull policy with separate cargo coverage, which is what freight insurance is built for.