The world of business relies on the transportation of goods, but shipping your valuable cargo across vast seas can feel like a risky endeavour. From storms to pirates, unforeseen accidents are always a possibility that can lead to a disaster during your good’s oceanic journey. This is where marine insurance steps in providing a safety cushion for your cargo as it traverses the globe. However, understanding the nuances of marine insurance policies can be challenging.
Whether you're a seasoned sailor or a newcomer to the world of insurance coverage, navigating through the sea of policies can be overwhelming. Here, we will explore the principles of marine insurance and common mistakes to avoid when selecting the suitable policy for your requirements.
Here's an overview of the principles that serve as the basis for marine insurance
Indemnity: This principle serves as the cornerstone of marine insurance. It states that the insurance company will provide compensation for losses due to covered perils. The main aim is to return the individual to their pre-loss financial position, not to provide them with an unexpected profit.
Insurable Interest: For a business to secure insurance, it must have an interest in the property being insured. This means they will benefit financially if the property reaches its destination safely and face a loss if it is damaged, lost or stolen. For instance, a company transporting goods in a container has an insurable interest in that cargo.
Utmost Good Faith: Both the insured party and the insurance company are required to act with honesty and fairness throughout the process. The insured party must disclose all information about the property being insured and the voyage, while the insurance company must handle claims in a transparent manner.
Proximate Cause: Marine insurance policies cover losses that are directly caused by perils listed in the policy. The proximate cause refers to the predominant reason for the loss. For example, if a cargo ship sinks due to colliding with another vessel, the collision would be considered as the proximate cause.
Subrogation: This principle enables an insurance company, upon settling a claim, to pursue legal action against the party to recover their expenses. For instance, if a cargo ship is damaged due to the carelessness of a port operator, the insurance company might aim to recoup its expenses from the port operator.
Contribution: When multiple insurance companies insure a vessel or cargo, the principle of contribution mandates that each insurer will chip in towards a claim based on the amount of insurance they provide. This system ensures that no single insurer bears the brunt of a claim. There must be at least two policies, and each should be a policy of indemnity. Also, the policies must provide coverage for the same peril and interest.
The following are some mistakes you should avoid when looking for a marine insurance policy —
Overlooking Policy Exclusions and Limitations: Not all marine insurance policies cover every scenario. Thoroughly examine the policy terms to understand what situations or events are excluded or limited in coverage.
Pay close attention to coverage specifics, deductibles, and claim procedures, making sure you completely grasp the policy terms as it helps prevent any surprises later on. This information can help you spot any gaps in your coverage and think about add-ons if needed.
Emphasising Price Over Coverage: While cost is important, prioritising price above coverage could spell trouble. A comprehensive marine insurance policy strikes a balance between affordability and scope of coverage tailored to your business requirements and risk profile. It’s advisable to compare quotes from multiple marine insurance providers before picking one.
Neglecting Accurate Asset Valuation: Incorrect valuation of assets may lead to insufficient coverage when filing a claim. Regularly update the value of your equipment, cargo, and other insured assets to ensure your policy accurately reflects their true worth. This practice helps guarantee a fair settlement in the event of a claim.
Not Reviewing Your Needs: Your insurance requirements may change as your business expands or changes. Do not underinsure or opt for inadequate coverage. It’s a good idea to get quotes and explore coverage options.
Neglecting Open Communication with your Insurer: Stay in touch with your insurer; keep them updated on any changes in your business operations, such as transportation routes or types of cargo being transported. This helps ensure that your coverage remains sufficient and prevents disagreements later on.
By being aware of these mistakes and understanding the principles of marine insurance, you can avoid leaving your business vulnerable due to a lack of knowledge or hasty decisions. Implementing risk management alongside a tailored marine insurance plan that meets your needs is key to ensuring a smoothly operating venture. Also, seeking advice from your insurer can be extremely beneficial for businesses unfamiliar with the complexities of marine insurance. Your insurer can assist you in selecting the right policy, ensuring adequate coverage and guiding you through any claim process if needed.
The biggest mistake businesses make is not understanding the types of coverage available through inland marine insurance. Inland marine insurance is not just for goods in transit over water as the name might imply. Instead, it includes mobile assets or assets that require specialized coverage such as construction equipment, valuable artwork, electronic devices and even property stored off-site or in transit. If they do not understand the range of applications of inland marine insurance, businesses could miss essential coverage for their particular needs.
Another common error is underestimating the value of mobile property and assets covered by inland marine insurance. Businesses think that standard property insurance policies adequately cover their assets when really mobile property includes tools, equipment and specialized machinery that might not be covered under standard policies. Poor coverage for these critical assets can have significant financial consequences should damage, theft or loss occur, preventing business from going ahead.
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A common mistake for businesses is choosing cost over coverage when selecting inland marine insurance. While finding affordable insurance is essential to financial viability, focusing too much on price can leave critical assets unprotected. Businesses should instead look for competitive premiums balanced with comprehensive coverage that fits their risks and their mobile property value. Businesses that make cost-driven decisions risk being underinsured and losing money that could have been protected by a stronger policy.
When buying inland marine insurance, businesses fail to properly value their mobile assets. Failure to properly assess the value of equipment, inventory, and other moving property can lead to inadequate coverage limits that may not cover losses when a claim occurs. Proper valuation, including periodic appraisals and documentation of asset values, ensures businesses have adequate coverage based on the worth of their mobile property, reducing the risk of underinsured exposure in case of an unexpected event.
Some businesses make the mistake of overlooking policy exclusions and limitations when choosing inland marine insurance. Each insurance policy includes certain exclusions as to what risks and assets are excluded from coverage and limits on coverage quantities or requirements for coverage to apply. Ignoring these exclusions and limitations can result in misunderstandings about the scope of coverage and business being denied claims or under protected when losses occur. Understanding and addressing policy exclusions and limitations is critical for businesses to provide protection for their mobile assets.
A critical decision for businesses looking to protect their mobile property and assets is selecting the right by inland marine insurance. Avoiding common mistakes like misunderstanding the scope of coverage, underestimating asset values, putting price before coverage, neglecting proper valuation and ignoring policy exclusions and limitations can help businesses make sound decisions that protect their operations from unexpected risks. Taking the time to determine their unique insurance needs and working with experienced insurance professionals can help businesses obtain broad inland marine insurance that provides protection for moving assets.