Marine Insurance

Moving goods from one place to another has several risks. Many external factors affect the safety of the consignment. So, how can you protect the goods Read More

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What is Marine Insurance?

Marine insurance protects against the loss or damage of goods or cargo during transit. You must buy this insurance when you move cargo from one location (source) to another (destination). It also protects goods while they are held at any terminal, port, or point of transport between the source and destination. Even though it is called marine insurance, this insurance policy protects against transit risks during any type of transportation, such as sea, air, rail, road, and inland waterways.

Typically, marine insurance is purchased by a forwarding agent, importer, or exporter. Businesses involved in the transit of goods can also buy marine insurance. Many individuals who ship their belongings from one point to another can also get marine insurance.

Why is Marine Insurance Important?

Marine insurance is important when goods are involved in import and export trade proceedings. It applies to all modes of transportation for goods and cargo. It is often called a contract of indemnity. Some of the reasons why marine insurance is important are:

1Maximum Protection Against Financial Loss

Maximum protection protects against loss incurred due to cargo damages, damages to ships, and damages caused by other maritime assets. With this safety net, you never have to worry about any financial loss that may happen due to theft, accidents, or other events.

2Peace of Mind

When you purchase high-value cargo, ensuring protection with marine insurance provides peace of mind for all the parties.

3Customisable Coverage

Cargo requiring specialised marine insurance can also be protected with customizable policies that cover risks such as collision, piracy, and more, apart from general losses.

4Adherence to Industry Standards

In many countries, businesses transporting goods must get marine insurance to comply with industry regulations and standards.

5International Coverage

Insurance policies with international coverage protect goods while they are being transported across international waters and borders.

6Efficient Risk Management

For a relatively small price paid as an insurance premium, businesses can protect their goods against different types of maritime risks such as accidents, theft, piracy, natural disasters, and others. This helps in effective risk management, thus helping to focus on other tasks at hand.

7Contractual Obligations

Marine insurance is also crucial to fulfilling necessary contractual obligations. The insurance policy must meet the requirements of Carriage Insurance Paid (CIP) and Cost Insurance and Freight (CIF). An adequate marine insurance policy covering the total value of the cargo is needed even if the goods are delivered under Delivered Duty Paid (DDP) or Delivered Duty Unpaid (DDU) terms.

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Who Can Get Marine Insurance?

Per the Marine Insurance Act, 1963, the insurer is responsible for covering loss or damage during marine transport. The insurer must assess the extent of damage, compensate, and bear the costs, freeing the insured from financial liabilities.

Your cargo is of immense value when you operate a business involving goods. When you export goods, you must ensure that your customers get their deliveries promptly. In case of unforeseen events that can result in damaged or lost goods, you must protect your business against penalties and liabilities. This also applies when you are an individual looking to move your valuable personal belongings for professional or personal reasons.

The following are a few types of people or businesses that need marine insurance benefits:

  • Ship owners, to protect against loss, damage, and liability claims
  • Freight forwarders to protect against loss or damage during transit
  • Shipping companies for protecting their cargo during transport
  • Shipbuilders and repairers to get coverage against risks to vessels and liability risks during the repair, maintenance, and construction of ships
  • Terminal authorities and port operations to protect against loss, damage or liability claims while handing vessels and cargo in ports
  • Marine contractors involved in oil and gas exploration offshore
  • Charterers who take over a vessel's responsibility for a specific period
  • Individuals moving household items or valuables from one place to another

Features of Marine Insurance

A comprehensive marine insurance policy is useful in mitigating risks while transporting goods by sea, air, or land. This type of insurance is suitable for businesses operating a fleet of vessels, importing or exporting cargo, or a shipping company. Apart from protecting against financial loss, such an insurance policy will also help you overcome liability risks. Some of the features of a comprehensive marine insurance for cargo policy are:

1All Risk Coverage

A comprehensive policy protects against common and uncommon maritime perils that the cargo and vessel are exposed to during transit.

2Customizable for Specific Needs

You can customize the policy to cover specific risks associated with cargo.

3Flexible Plans

You can choose any marine insurance plan and customize it according to your budget to protect your goods.

4Worldwide Claim and Settlement Support

When the goods are lost or damaged, you must file a claim for your marine insurance policy at a specific location based on where the loss occurred. Worldwide policy terms will ensure a stress-free claiming process.

5Extended Coverage

You can buy add-ons to get additional coverage. This will help you extend your protection.

How To Choose The Right Marine Insurance?

Making the right decision while buying Marine insurance is critical to saving money and getting adequate protection. If you try to lower the premium by choosing the bare-minimum policy, you will lose out on protection. However, if you buy all the add-ons, you have to pay a higher premium.

The ideal insurance policy depends on what you need and what coverage your insurance provider offers. You must shop online and calculate Marine insurance premiums before choosing a policy. You can always change your insurance provider and buy a brand new policy when you renew your Marine insurance. Some of the factors to consider while choosing a policy are:

1Insurance coverage scope

Third-party liability coverage is mandatory for all Marine insurance policies. You can get an optional comprehensive policy and customize it to your needs. Before signing the policy document, ensure that you understand the scope of coverage thoroughly.

2Choosing optional coverage

The add-ons provide excellent protection, but you should only buy those you need. The needs of a Marine owner who rides their Marine daily for commute and who rides their Marine for fun are different. Also, if you go on long Marine journeys crossing state borders, make sure that you understand the extension of coverage and legal requirements in other states.

3Ease of claim settlement

You will realize the value of your Marine insurance policy only when you try to make a claim. An attractive, low-cost Marine insurance policy will be useless if the claim settlement process is tedious and time-consuming. You have to choose the insurance provider after checking their Incurred Claim Ratio (ICR). It refers to the number of claims settled successfully by the insurer against the total number of claims they received. It is better to go with an insurance provider with a higher ICR.

4Garage network

When there is damage to your Marine, you have to take it to the authorized garage network as per your insurance provider. So, you have to ensure that your insurer has repair garages in your location so that you can easily take your Marine there when needed. Also, an insurance provider with an extensive garage network can provide you with road assistance even in remote areas. This allows you to get cashless repairs for certain damages.

5Customer support

If you have to make an insurance claim, you have to interact with the customer support team of the insurance provider. Before choosing an insurer, investigate their customer support team and ensure they have multiple communication channels. Also, you have to check their response time and ticket resolution rates so that you get the help you need immediately.

Principles of Marine Insurance

Marine insurance impacts multiple industries, like traders, distributors, sellers, law enforcement, buyers, insurers, tax authorities, logistics companies, and other handlers involved in the supply chain. There are 6 principles involved in marine insurance to protect the interests of all the stakeholders:

1Principle of Good Faith

It is the most common and mandatory principle where all parties require absolute trust, including the insurer and insured.

2Principle of Proximate Cause

With proximate cause, the insurance provider must settle the requested claim for the cause even though the actual magnitude of the loss may be due to the possibility of multiple causes.

3Principle of Insurable Interest

The consignment, expected marine risks, and assured marine insurance coverage should have legal relevance. The insurer must be interested in ensuring the safe arrival of goods.

4Principle of Indemnity

Insurance extends to parties directly affected by the loss. Such insurance is not suitable for gaining profits. The compensation is only given based on the actual loss incurred.

5Principle of Subrogation

It is an extension of the indemnity principle. The marine insurance policy's scope is limited in that it is meant to cover only losses. The insured entity can dispose damaged goods. However, there might be a situation where the net amount settled by the insurance provider exceeds the cost of damaged goods after the claim. In such cases, the insured entity must return the excess amount to the insurer.

6Principle of Contribution

When risk coverage for goods is spread across multiple insurers, all the insurance providers contribute to the compensation and fairly distribute their share of compensation.

Marine Insurance: How it Works

Exporters need marine insurance even though intermediate handling agencies and shipping companies have their own insurance. The intermediaries have limited liabilities for the goods when they handle consignment duties. On the other hand, shipping companies compensate on a per-package or per-consignment basis, which is definitely not enough for the exporters to overcome financial losses due to damaged or lost goods.

Here is how marine insurance works:

  • The cargo owner or shipping company purchases marine cargo insurance before shipping the consignment. You must choose the insurance policy based on cargo type, mode of transportation, total value of the goods, length of travel, source and destination ports, and any other specific needs.
  • Once you pay the insurance premium, the policy coverage will start immediately, covering damage or loss incurred due to natural disasters such as lightning, storms, and earthquakes and man-made risks such as piracy, fire, and theft. Based on the policy terms, the coverage may also extend to improper packaging and handling of cargo or omissions or errors made by the carrier during transit.
  • The cargo owner can immediately file a claim with the insurance company if the consignment suffers any damage or loss during transit. While submitting the claim, you must also submit proof of damage or loss, cargo receipts, bills of lading, and other supporting documents as required by the insurer.
  • The insurance company will investigate to determine the right compensation for the cargo owner. The settlement is decided based on the total cargo value and the extent of damage. The cargo owner can get compensated for the losses incurred.

While the insurance provides financial compensation for any loss or damage associated with shipped goods, taking necessary precautions while packing, loading, and unloading goods is still recommended. Also, shipping companies should take the necessary steps to avoid theft and improper handling.

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Marine Insurance Policy Types

Different types of marine insurance policies are available to cater to different types of businesses handling cargo. Choosing the right policy type will help you lock in affordable premiums while getting the coverage you need. The following are the different types of marine insurance policies:

1Import

Covers goods imported to India from anywhere in the world. It usually covers transit modes like sea and air.

2Export

Covers goods exported from India to anywhere in the world. This covers sea and air transit modes.

3Inland Marine Insurance

Covers goods transported within any part of India by road or railway.

4Cargo Insurance

Covers marine cargo during transit and also covers loss due to shipping accidents, delayed voyages, or unloading issues. It also includes third-party liabilities caused to ships, ports, or other transport forms due to the insured cargo. This type of policy is ideally suited for heavy cargo shipments and tankers. It protects the vessel apart from the cargo.

5Hull Insurance

Covers any loss or damage to the vessel, including articles of the ship and furniture, against any unforeseen events.

6Freight Insurance

Covers losses for the shipping company if the freight is damaged or lost in transit.

What are the Different Marine Insurance Plans?

The number of consignments, source and destination, and weight and value of cargo vary with each voyage. So, finding the right policy that covers any particular voyage is important. Some of the marine insurance plans are:

Open Plan

Covers all shipments for a specific time period, usually valid for longer than a year.

Time Plan

Covers all shipments for a specific time, usually valid for a year.

Voyage Plan

Covers shipments for a specific sea voyage, and the plan expires immediately after the journey ends.

Mixed Plan

Provides coverage of both the voyage plan and the time plan.

Port Risk Plan

Covers risks for ships stationed at the port.

Valued Plan

Covers the value of the cargo or consignment as mentioned in the policy document in advance. It is useful in cases of lost cargo or consignment, and compensation is based on the predetermined insurance value.

Floating Plan

The claim amount is specified during the policy’s purchasing. However, other details, including cargo details, value of cargo, etc. aren’t mentioned until the vessel begins its voyage. It is ideal for shipping companies that make regular cargo transportation trips.

Wager Plan

There are no fixed, predefined repayment terms. It provides a safety net for any harm at the time of reimbursement. There will be no compensation if the loss if not worth considering.

Named Policy

The ship’s name is mentioned in the insurance document, implying that the policy is issued in the ship’s name.

Fleet Policy

Multiple ships belonging to the shipping company or owner are covered under a single policy. It is a time-based policy that covers old ships as well.

Single Vessel Policy

It is self-explanatory, as this policy covers only one vessel.

Blanket Policy

The policy offers maximum protection. All coverage must be purchased at the time of buying insurance.

Understanding Marine Insurance Clauses

The clauses under a marine insurance policy refer to all types of risks handled by the policy.

Based on the type of transit, the clauses are classified as follows:

  • Inland Transit Clauses (ITC): Covers inland transits within India only.
  • International Cargo Clauses (ICC): Covers international cargo only.

The 3 main types of marine insurance clauses are:

1

Institute Cargo Clause A

Maximum Coverage: Covers losses due to chipping, breakage, denting, theft, bruising, non-delivery, all types of water damage, etc. Extends coverage mentioned in clauses B and C.

2

Institute Cargo Clause B

Additional Coverage: Covers shipment against disasters like volcanic eruptions, earthquakes, damage due to rainwater, river water, seawater, etc. It includes clause C as well.

3

Institute Cargo Clause C

Basic Coverage: Covers shipment against fire, discharge of cargo due to distress, and accidents like sinking, explosion, derailment, collision, etc.

Some of the other standard clauses are:

aConstructive total loss

The insurer pays for the full value of the cargo if repairing it is more expensive than its actual value.

bActual total loss

The insurer pays compensation for the total loss of insured cargo or vessels.

cParticular average

The insurer pays only for a portion of the total loss.

dGeneral average

The loss incurred is shared by all the parties involved in the voyage to prevent complete destruction.

eCollision liability

Vessel owners of colliding ships are liable for the collision if the crash resulted from either party's negligence.

Marine Insurance Inclusion and Exclusion

Understanding what is covered and what is excluded is critical to making the right choice during insurance policy purchase. The insurance covers dire situations during the cargo journey. Compensation is provided based on the value of the loss. The basic elements of such policies are:

  • Fire accident
  • Explosion
  • Stranding
  • Collision
  • Sinking
  • Overturning
  • Natural calamity damage
  • Washing overboard
  • Cargo leaving the port of distress
  • Total loss of package while loading or unloading
  • Derailment of land transport
  • Cost of reconditioning
  • Survey fees
  • Jettisons
  • Forwarding expenses
  • General average sacrifice salvage charges

Understanding what is not covered under the marine insurance policy is vital

Some of the exclusions are:

  • War
  • Strikes
  • Riots
  • Civil commotion
  • Intentional damage or loss
  • Bad packaging
  • Bankruptcy
  • Liquidation
  • Insolvency
  • Financial difficulties
  • Regular wear and tear during transit
  • Delayed cargo
  • Bad quality of goods
  • Renovation and repairs
  • Other types of delivery issues

How to Get the Best Marine Insurance Premium?

The marine insurance premium is calculated based on the value of the cargo and the policy terms. Some umbrella policies provide adequate coverage for a specific period but may not provide total compensation. When a predetermined sum is mentioned as compensation at the time of purchasing the policy, the insurer will not pay anything beyond the predetermined amount. If you try to extend coverage, you must pay a higher premium. However, with marine insurance, you should avoid trying to save on insurance premiums by foregoing coverage. Even a single loss can result in total business failure for high-value cargo.

Generally, you can calculate premiums based on a simple formula:

Premium = Cost of freight or shipment value + 10% of total cost * quoted premium value

However, it is recommended that you use the premium calculator of the specific marine insurance companies you are interested in because the premium is based on the type of insurance policy and the plan you choose.

Claim-Process-Marine-Insurance-Easy

The claiming process of the marine insurance policy is an important factor to consider while buying marine insurance. As your cargo moves from one region to another and, in many cases, from one country to another, you must find an insurance provider to facilitate borderless claiming. This allows you to file a claim with your insurer in your country without worrying about where the damage or loss occurred to your cargo.

Now, insurance providers have enabled online claims that allow you to apply for insurance claims using their website. This has simplified the entire process of getting compensation for losses quickly. To claim for any loss or damage to cargo, consignment, or vessel, you have to follow the following simple steps:

  • 1 Inform your insurance provider about the loss or damage immediately.
  • 2 File an FIR report in cases of theft, piracy, or missing packages and get the acknowledgement.
  • 3 Request surveyors to visit the damaged package during transit and lodge a monetary claim with the right shipping company.
  • 3 Submit the necessary documents.

Once you file the claim, you can get a URN, or claim number. It can be used to check the status of the claim. The claim settling duration may vary based on the extent of damage or loss, location of cargo, and other factors. Some of the documents that are commonly needed for filing a claim are:

  • Insurance policy documents
  • Original shipping invoice with detailed specifications
  • Bill of lading
  • Claiming bill
  • Copies of letters exchanged with carriers and handlers
  • Police FIR report

How to Get Marine Insurance?

The introduction of fintech has empowered the insurance industry to sell insurance to anyone in India. You can now purchase a marine insurance policy online, similar to any other insurance policy.

To buy a marine insurance policy, you must fill out the details and choose the right policy and plan. Then, you will get quotes from leading marine insurance providers in India.

You must then review your quotes and choose the policy that best fits your needs and budget. Once the premium has been paid online, the insurer is expected to extend coverage immediately until the end of the policy period.

Marine Insurance FAQ's

INCO terms are common in international trade, where the responsibility for delivery changes between buyers and sellers. It defines sales contracts, applicable obligations, costs, risks involved, and agreements on length of delivery. Some of the common INCO terms are Ex Works (EXW), Cost Insurance Freight (CIF), Free On Board (FOB), Carriage and Insurance Paid (CIP), Delivery at Place (DAP), Carriage Paid To (CPT), Delivered at Terminal (DAT), Free Carrier (FCA), Free Alongside Ship (FAS), and Cost & Freight (CFT).

You can buy a one-year policy from various marine insurance providers in India based on your specific needs. You can obtain quotes and choose the best policy for your needs.

The premium for a marine insurance policy is calculated based on the type of ship, age of the ship, cost of the ship, trading and tonnage limits of the ship, management of the ship, type of insurance cover, size of cargo, value of the cargo, and more. The type of policy, plan, and coverage you need are also considered while calculating the premium. You can save on insurance policy premiums by choosing the exact coverage you need.

The common contracts under marine insurance in India are FOB Contracts, FOR contracts, C&F contracts, and CIF contracts.

Yes. You can use the websites of insurance providers to obtain policy quotes and choose an insurer. Once you determine the policy, you can pay your premium online.

Maritime perils are dangers related to transporting any property through the sea. Some common dangers are sinking, collision, stranding, fire, pirates, capture, jettison, war perils, thieves, washing overboard, etc.

All marine cargo policies come with a free capture and seizure clause, which excludes the insurance from providing compensation for loss incurred due to war risks, riots, strikes, civil commotions, etc. If your cargo is going through countries with varying political and social climates, you may need additional coverage aside from the risk plan.

Yes. In India, all commercial transport businesses must purchase an insurance policy suitable for their business needs. With marine insurance, you can stay assured that you will not suffer financial losses due to unforeseen circumstances.

For marine insurance, the ship's owner, cargo owner, ship's master and crew, the creator who advanced money on the ship's security, mortgagor, trustee with a property in trust, and individual advancing the freight all have an insurable interest.

Check the reputation of the insurer and ensure a robust claim settlement process. Choose coverage suitable for your needs while keeping the premium affordable. Purchase marine insurance online and take advantage of the discounts offered.

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