Under the Marine Act of 1906, Marine insurance is a contract between the insurer and the policyholder under which the latter insures the policyholder against transit - related damage or losses. In other words, the insurance provider or insurer reimburses the insured or purchaser for losses to the insured cargo during the transit.
Like any other insurance contract, a marine cargo insurance policy assigns the responsibility of the policyholder to the insurance company. The policyholders may be any party to the transportation of goods.
- A shipper or cargo owner buys a suitable marine insurance plan from a reputable insurance provider before shipping the goods. The good thing in regard to a marine policy is that it may be adapted to the particular circumstances of the party involved.
- The major inputs for designing a suitable marine policy are the mode of transport, destination, type of goods, value of goods etc.
- In general, a marine policy will insure losses or damages to the goods/cargo caused by natural calamities such as earthquakes, storms, thunder and lightning, or manmade risks such as theft, fire and explosions, vandalism, etc.
- Also covered are reputable marine insurance providers for improper handling or other errors by the carrier.
- The premium of a marine insurance policy is not fixed. Rather it is computed by type of policy, type and value of goods, mode of transport, etc.
- If the cargo owner or shipper damages or loses the goods in transit, he can claim the insurance under their terms and conditions.
- For any successful marine insurance claim, the insured has to provide evidence of loss or damage - like shipping receipts, bills of lading, etc.
- The insurance company receives the claim and decides how much to compensate the cargo owner or shipper. After everything is determined, the insurance provider makes a final settlement by offering the decided compensation to the insured.
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Marine insurance is special insurance that covers risks of shipping goods by sea. It provides financial protection against most hazards a maritime voyage may face, including piracy, vessel sinkings, collisions and natural disasters. This particular type of insurance is crucial for businesses engaged in global trade because it covers losses incurred by unanticipated events that might interrupt or damage cargo in transit.
Marine insurance policies can be one of two main types: hull and cargo insurance. Hull insurance covers the ship (its hull, machinery and equipment) and cargo insurance protects the goods being carried. Marine insurance may also provide liability for third-party claims related to maritime accidents or incidents.
Marine insurance policies are categorized by coverage area and plan structure. Some of the major types of marine insurance policy grouped by these categories are discussed below:
Based on Coverage
Some common marine insurance policies by type are listed below:
Hull and Machinery Insurance: The hull is the part of the ship most important to avoid damage to the goods within. Hence, hull and machinery insurance provides coverage for damage/loss to the ship's body or machinery.
This particular kind of insurance policy typically deals with accidents resulting from explosions, smashes, or another natural disaster. This coverage is generally purchased by the owners of a vessel or ship.
Damage Liability Insurance: As its name implies, it insures the insured's liabilities. Those liabilities include injuries or loss to a third party.
Freight Insurance: This type of marine insurance insures the shipper or logistics company for loss or damage during transit.
The major types of transit insurance policies based on plan structure are listed below:
One Transit Policy: This type of marine policy covers one transit. This is used by infrequent shippers or those that make shipments just a couple of times a month.
Annual Open Policy: Such marine policy has an annual tenure. It includes all transits made during the policy. This is a useful policy if you make several shipments per year.
The scope of marine insurance extends beyond the protection of ships and cargo. It provides maritime risk management and indemnification covering all those involved in the carriage of goods by sea. The scope of marine insurance generally comprises:
Protection against Perils of the Sea: Marine insurance policies typically cover disasters such as floods, tsunamis and hurricanes in addition to manmade perils like pirates, collisions and theft. Marine insurance covers these risks and ensures that goods reach their destination safely and on time.
General Average and Salvage Costs: General average and salvage costs may occur if a maritime emergency necessitates sacrifices or expenditures to preserve the common safety of the ship and cargo. Marine insurance policies often cover these costs, helping all parties involved in the voyage.
War and Strikes Risks: Because geopolitical conflicts and labor disputes are unpredictable, marine insurance policies may provide optional war and strikes risk. This coverage protects insured parties from losses resulting from war, terrorism or labor unrest affecting maritime operations.
Freight and Charter Party Liability: Marine insurance may also extend to include freight contract and charter party agreement liabilities. This includes indemnification for breach of contract, delivery delay, cargo damage and other contractual obligations relating to sea freight transport.
Marine insurance helps minimize the risks and uncertainties of maritime trade. Marine insurance provides protection for ships, cargo, and liabilities to all involved in international shipping. Understanding the nature and scope of marine insurance is essential information for companies looking to safeguard their assets and guarantee the efficient and safe transport of items across the seas.
1. Why is marine insurance important in global commerce?
Marine insurance is an essential part of global commerce and protects against risks of shipping goods over water. It provides financial protection against various perils which might interfere with or damage cargo during maritime voyages, ensuring international trade.
2. How does a Marine insurance policy work under the marine Act of 1906?
A marine insurance policy is an agreement between the insurer and also the insured under which the insurer deals with transit-related damages or losses. In case of losses to the insured cargo while in transit, the insurance provider reimburses the insured for all the losses as per the policy.
3. What exactly are the key terms of a marine insurance policy?
The marine insurance policy insures cargo on transit by land, air or waterways, against natural calamities, theft, fire, vandalism and other risks. It is tailored to the insured party by factors including mode of transport, destination, type of goods and value.
4. What types of marine insurance policies exist by coverage area?
Marine Insurance policies are divided by coverage area into Hull and Machinery insurance, Damage Liability insurance and Freight insurance. These policies provide specific coverage for specific maritime risks, including hull, machinery or cargo damage, as well as liabilities and transit losses.
5. What is the scope of marine insurance beyond ships and cargo?
The scope of marine insurance also covers all those involved in maritime transport. It includes sea perils, general average and salvage costs, war and strikes risks and liabilities arising from freight contracts and charter party agreements. This broad scope covers all maritime risk and is insured.