Different Types of Marine Insurance Policy

If you have ever shipped across the border, you must be aware of the various stakeholders whose assets are at risk in the process. As a seller, your goods are in transit. The buyer is waiting to get the goods and use them in her operations. The cargo, shipping, and transportation companies have the liabilities hanging on their heads to deliver the shipment in time. One minor mishap in the process can result in delays, accidents, or even damaged goods. Such risks can ripple across the system and cause financial distress to otherwise unrelated businesses. A marine insurance policy can save you from the trouble of being uncertain about the future and its impact on your shipment.

What is Marine Insurance?

Marine insurance is a form of commercial insurance policy used by businesses, logistics companies, and buyers of goods worldwide. Depending on your role in the supply chain, a marine insurance policy can generate value for you. Shipment companies can protect their assets like the ship, equipment, and furniture on the ship. Sellers can protect their goods from getting stolen, damaged, or delayed in the process. And buyers can get protection against already paid-off goods if they are directly liable for the shipment's logistics.

How Does Marine Insurance Work?

Marine insurance provides coverage for goods, ships, and other transport means against risks like damage, theft, or loss during transit. The policyholder pays a premium based on the value of the shipment and the associated risks. In case of a covered incident, the insured files a claim, and the insurer compensates for the loss or damage as per the policy terms. Marine insurance can be customized to include coverage for specific routes, cargo types, or additional risks like piracy. This ensures businesses safeguard their financial interests during domestic or international trade.

What are the Types of Marine Insurance?

For business operators who regularly engage with cargo, transit, and marine transportation companies, understanding the types of marine insurance can be a lesson in risk management. The types of marine insurance depend on how you conceptualize the insurance cover, the risk parameters, and the underlying assets. The two broad types of marine insurance policies are generally divided based on coverage and the insurance contract structure. Types of Marine Insurance as Per the Types of Coverage

1. Marine Cargo Insurance: This is one of the types of marine insurance policies that are systemically important. The insurance policy covers the cargo, the tanker, and the third-party liabilities.

The cargo can get damaged during the process while unloading or loading, or during the transit, or even during an accident. Since a ship-owner and operator has to run an extensive operation, her entity is liable to several businesses. Having third-party coverage protects her from paying off every related party if the ship undergoes an accident. The same insurance policy also covers the very tanker and the ship carrying the cargo.

1. Damage Liability Insurance

This form of marine insurance policy is broadly structured to cover many unforeseeable risks associated with an asset. If the asset can get damaged anytime during the transit via marine routes, it can be covered with comprehensive damage liability insurance.

2. Hull Insurance

While the cargo may belong to a separate entity, the logistics might get handled by a distinct entity, and there might be a different entity on the receiving end of the shipment the vessel-owner has to ensure her risks are mitigated. The hull insurance plan covers explicitly everything on the vessel that is under the proprietorship of the vessel-owner.

3. Damaged or Lost Freight Insurance

The shipping company might be held liable by several parties in one go if the shipment is damaged or lost in transit. And yet, there is a probability of this happening on practically any route. This insurance cover will help the shipping company get compensated if the damage is incurred from an event out of its direct control.
Types of Marine Insurance as Per the Structure of the Plan

1. Open Policy: All the shipments are made in a stipulated period.
2. One-Year or Timed Policies: These are valid for a fixed period of the contract.
3. Voyage-Based Insurance Cover: As soon as a specific voyage to a particular period is over, the policy expires. There are also some hybrid policies covering both the timed plans and voyage-based plans.
4. Port-Risk Cover: As the name suggests, the insurance policy covers the damages caused while the vessel is still at the port.
5. Cargo Value Cover: The cargo's value is already determined and agreed upon in the insurance documentation. This value is then insured.
6. Floating Plan (Ideal for Regular Customers): All the traders, importers, exporters, or shipment companies that regularly engage in marine transits should take this cover. It gives them particular coverage before the vessel is on its way. The other details are disclosed later. It saves time and still provides the necessary protection.
7. Wager: This cover provides compensation only against the considerable damages. No stipulated amount is discussed prior.

Also Read: Do MSME Insurance Policies Cover Worldwide Accidental Bodily Injury?

FAQs

1. What is the basis used for valuing goods?

The cost, insurance, and freight mentioned in the invoices are used as the basis for valuing the goods in transit.

2. Is marine insurance expensive?

Marine insurance costs vary based on factors like the type of cargo, mode of transport, route, and coverage level. While it may seem costly, it provides valuable protection against significant financial losses.

3. What factors affect the cost of marine insurance?

Factors include the value of the goods, nature of the cargo (perishable or hazardous), shipping route, transit duration, past claims history, and additional coverage options like war or piracy risks.

4. Is marine insurance mandatory?

Marine insurance is not always mandatory but is highly recommended for businesses involved in shipping goods. In some cases, it may be required by law or contract terms.

5. How do I make a claim on my marine insurance?

To file a claim, notify your insurer immediately, provide all necessary documents (bill of lading, invoice, survey report), and detail the damage or loss. The insurer assesses the claim and reimburses based on policy terms.

6. What are the principles of marine insurance?

Key principles include:

1. Utmost Good Faith: Accurate disclosure of all relevant details.
2. Insurable Interest: The policyholder must have a financial stake in the insured goods.
3. Indemnity: Compensation only covers the actual loss.
4. Subrogation: Insurers gain rights to recover losses from third parties.

7. What are the functions of marine insurance?

Marine insurance protects against financial losses, promotes trade confidence, facilitates risk-sharing, and ensures quick recovery from damages or losses, thus stabilizing business operations. *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.