Terms & Glossaries of Shipping and Trading

A/P (Additional Premium)

A/P (Additional Premium) is an extra insurance fee reflecting increased risk.

Understanding A/P (Additional Premium) in Insurance and Cargo Insurance

A/P (Additional Premium) is a term used in the insurance industry, referring to additional insurance fees. When an insurance company believes that an increase in insured risk may lead to an increase in claim risk, they may require the insured to pay additional insurance fees to cover this increased risk. This typically occurs during the original policy period when the insured risk has changed, and the insurance company needs to adjust the insurance fee to reflect this change. For example, if a car is involved in an accident, causing the insurance company to perceive an increase in the risk level of the vehicle, the insured may need to pay additional insurance fees (A/P) to continue enjoying insurance coverage.

In cargo insurance, A/P (Additional Premium) refers to the extra fees charged by the insurance company to the insured during the original insurance contract period due to changes in cargo value, shipping routes, transportation methods, etc., which the insurance company deems necessary to reflect these changes. This adjustment may be due to one of the following reasons:

Change in cargo value: 

If the value of the cargo increases, such as an increase in the quantity of goods or if the goods become more valuable, the insurance company may require additional insurance fees to ensure coverage of the increased risk associated with this additional value.

Change in shipping route or method: 

If there is a change in the shipping route or method of the goods, such as a switch from land transport to sea or air transport, or selecting a longer shipping route, it may result in a change in the level of risk, necessitating an adjustment in insurance fees.

Change in risk assessment: 

If the insurance company reassesses the risk of the goods and determines that the level of risk has increased, such as an increase in accident frequency during cargo transportation or changes in the transportation environment, additional insurance fees may be required.

For the insured, paying A/P may be necessary to ensure adequate insurance coverage for the goods during transportation and to address changes in risk. In commercial operations, changes in cargo value and transportation methods may occur frequently, making A/P an important consideration in cargo insurance contracts.