What is Marine Insurance? Types & Policies
What is Marine Insurance?
According to Marine Insurance Act, 1906:
“An agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against incidental to marine adventure. It may cover loss or damage to vessels, cargo or freight.”
Marine insurance is a type of insurance that provides compensation for losses or damages of ships, cargo, terminals, depots, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination.
Ships, cargo vessels, terminals, and any other mode of transportation in which products are transferred or acquired between multiple points of origin and their eventual destination are covered by marine insurance.
This trip coverage protects shipping businesses and couriers against expensive potential losses while transporting goods by water by providing protection against transportation-related damages. The phrase was coined when parties began shipping products by sea. Marine insurance covers all means of cargo transportation, despite its name.
Transporters can choose coverage options specific to their trade, which is a significant aspect of maritime insurance. Shipping companies can select a plan that is tailored to their needs due to the variations of coverage requirements. Depending on the size of the ship and the routes covered, different insurances are available to provide coverage.
Ships, cargo, terminals, and any transport by which property is transferred, acquired, or held between the original locations and the final destinations are all covered by marine insurance. Cargo insurance is a subset of marine insurance, which also covers onshore and offshore exposed property (container terminals, ports, oil platforms, and pipelines), as well as Hull, Marine Casualty, and Marine Liability. Shipping insurance is required when products are shipped by mail or courier.
Features of a Marine Insurance Policy
The loss or damage of ships, cargo, terminals, and any other mode of transport by which property is transferred, acquired, or held between the points of origin and the final destination is covered by a marine insurance contract.
Cargo insurance is a sub-branch of maritime insurance that also includes property that is exposed to the elements on the coast and offshore. Container terminals, ports, oil platforms, pipelines, hulls, maritime casualty, and marine liability are a few examples. Shipping insurance is utilized when goods are shipped through mail or courier. The Marine Insurance Act of 1963 covers any type of insurance in a marine contract.
Marine insurance has rigorous policy requirements. Insurance policies are well-defined contracts. Slight differences or infractions might result in claims being rejected. Therefore insurer guidelines should always be followed. When it comes to reimbursing claims, policy providers stick to strict guidelines, and straying from the path could result in a loss of coverage for a costly claim. With this in mind, it’s critical to understand your policy’s features and requirements to ensure you’re covered.
The agreement and policy will be void unless there is an insurable interest. Anyone whose goods are being transported by sea and who could be harmed has an insurable stake in it. The insurer accepts the contract once the contractual agreement has been strictly followed and a proposal for the assured has been made. If the policy has not been issued individually, it can be derived from a contract.
How does Marine Insurance work?
Marine cargo insurance is a form of property insurance that protects goods while they are being shipped. Certain risks linked with transportation by sea, air, or inland rivers might result in property losses while in transit.
Marine cargo insurance protects commodities and modes of transportation from damage caused by weather, piracy, improper loading or unloading of cargoes, and other factors. This insurance is mostly for international shipments, and it will cover the items from the time they leave the seller’s warehouse until they arrive at the buyer’s warehouse.
Damages and losses to the products while onboard may be covered by the carrier of the goods, whether it be an airline or a shipping business. However, compensation is usually agreed upon on a “per package” or “per consignment” basis. It’s possible that the coverage given won’t be enough to cover the cost of the products transported. As a result, exporters prefer to send their goods after having them insured by an insurance firm.
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Types of Marine Insurances
Different kinds of marine insurance are as follows:
This policy covers the vessel of transportation against damages and accidents. The policy covers the hull and torso of the transportation vehicle, like a ship, as well as the different articles present in the vessel.
Machinery Breakdown Insurance provides cover against sudden and unforeseen physical loss or damage to the insured machinery. Machinery to be covered under this policy will include factory production machinery, workshop machinery, generators, industrial lathes, drills, compressors, etc.
Protection & Indemnity (P&I) Insurance
The primary purpose of P&I insurance is to provide policyholders with protection against personal injury, illness, and death claims from the crew, passengers, and so forth. P&I insurance also covers things like Liability claims as a result of a collision, Removal of the wreck.
Liability insurance is a type of insurance in which compensation is bought to provide any liability occurring on account of a ship crashing or colliding.
Freight, Demurrage & Defence (FD&D) Insurance
Freight Demurrage and Defense (FD&D) is legal costs insurance. The insured member obtains legal support and covers for legal costs up to USD 5 million in relation to disputes, arising from owning and operating a vessel, that fall outside other insurance covers.
To transfer the goods from one port to another, the amount paid to the owner of the ship is called freight. The payment of such freight can be made in two ways: either in advance or after the ship reaches its destination safely.
Freight insurance offers and provides protection to merchant vessels’ corporations. It stands for the chance of losing money in the form of freight, in case the cargo is lost due to the ship meeting in an accident.
Marine Cargo Insurance
Marine cargo insurance is also known as cargo insurance. It covers physical damage or loss of your goods while in transit by land, sea, and air. It also offers considerable opportunities and cost advantages if managed correctly. If the cargo is ruined, the owner gets the indemnity from the insurance company.
Also read: What is a straddle carrier?
Types of Marine insurance policies
There are various types of marine insurance policies also which are offered by the insurance companies in order to help the clients to select the best insurance policy.
Different types of marine insurance policies are as follows:
A voyage policy is that kind of marine insurance policy which is valid for a particular voyage. It covers the risk from the port of departure up to the port of destination. This type of policy is considered useful for cargo. The insurance company gives indemnity for damage of any property of the insured during the period of the voyage. The liability of the insurer continues during the landing and re-shipping of the goods. The policy ends when the ship reaches the port of arrival. This type of policy is purchased generally for cargo.
This policy is issued for a fixed period of time. The policy is generally taken for one year although it may be less than one year. This policy is commonly used for hull insurance than for cargo insurance. The ship is insured for a fixed period irrespective of voyages.
The joint form of voyage policy and time policy is called mixed policy. This policy is generally used for ship insurance.
Open or unvalued policy
In this policy, the value of the cargo and consignment is not put down in the policy beforehand. The value thus left to be decided later on is called the unvalued or open policy. The insurable value of the policy includes the price of the insured’s property, investment price, incidental expenditure, and all the expenditure as well. The unvalued policy is not used in practice so much. This policy is used only in freight insurance.
This policy is the opposite of the unvalued policy. In this policy, the value of the cargo and consignment is ascertained and mentioned in the policy document beforehand, thus, making clear the value of the reimbursements in case of any loss to the cargo and consignment.
Port Risk Policy
This policy is taken out in order to ensure the safety of the ship while it is stationed in the port. It covers the risks when a ship is anchored in the port. This policy is taken in order to protect the vessel that is portside for a long period of time. Coverage terminates as soon as the vessel leaves the port.
Wage policy is one where there are no fixed terms of reimbursements mentioned. This is a policy held by a person who does not have an insurable interest in the insured subject. He simply bets or gambles with the underwriter. The policy is not enforced by law.
The floating policy is also called the declaration policy. This policy is useful for the merchant who delivers cargo regularly. When a person ships goods regularly in a particular geographical area, he will have to purchase a marine policy every time. It involves a lot of time and formalities.
He purchases a policy for a lump sum amount without mentioning the value of goods and name of the ship, etc. it is the agreement between the insurer and insured that the insured declares a number of goods on the basis of shipment documents.
This policy is issued by mentioning the name of the ship and the price of the cargo. The named policy has been receiving popularity in marine insurance.
It is the policy that takes the risk in the block that is from sea route and land route. It does not only protect from the risk of the marine route but also covers the risks that occurred on the land too. It is a very useful policy for landlocked countries.
Marine insurance policy is a necessity for both importers and exporters who deal in the domestic and international transfer of goods. Such a policy provides comprehensive cover for risks, from the time the shipment leaves the seller’s warehouse and reaches its destination, which is usually the buyer’s warehouse.