The main goal of marine insurance is to protect your finances and assets while they are water-borne. If you deal with international trade, marine insurance is one way to get peace of mind and back up when you fall on hard times.
What is Marine Insurance?
Marine insurance covers the loss or damages of goods on terminals, cargos, and ships on water or land during transit. This damage includes sinking, theft, collision, fires, or other natural causes.
How Marine Insurance Works
The marine industry is one of the riskiest industries, and much thought is put into the insurance process. When you buy an insurance coverage, it moves all liability from you to the insurance providers. This means you will be acting as an intermediary with limited liability. Procuring an insurance policy as an exporter means the policy will protect you against any loss or damage to the cargo. One of the first obligations you must follow as an exporter is to have marine cover; this protects your customers’ interests. If a loss happens, you need to reach out to your underwriter, who will assign a surveyor to analyse the loss. In marine insurance, it is compulsory to issue agreed value policies. This agreed value is concluded between the insurer and policyholder except when an alleged fraud happens.
Types of Marine Insurance
Liability insurance protects the ships in the event of a crash, attack or collision that leads to sizable damage or loss. The policyholder gets compensated for liability that is beyond control.
Marine Cargo Insurance
It covers loss/damages caused to the cargo during transit. This coverage also handles damages caused due to delays in unloading or ship accident. This insurance is more beneficial for heavy cargo shipments e.g. tankers because it protects the entire ship.
Marine Hull Insurance
This type provides coverage to the vessel, including furniture and items on the haul. Shipowners must not overlook this particular policy.
All vital machinery on the ship is covered in the case of operational damages, which will undergo analysis by the surveyor before claims compensation.
Freight Insurance is a policy placed by a third-party company to ensure partial or total coverage for your cargo. It’s an exclusive policy only to the shipper and the particular freight shipment and will only be responsible for the third party’s claims.
Marine Inland Insurance
This coverage is not the same as marine insurance. While Marine insurance covers products transported on the sea, Inland covers products, and items, among other objects transported on land e.g materials transported via trucks.
Types of Marine Insurance Policies
- Time Policy: This is only valid for a certain period – Usually a year.
- Voyage Policy: This is only valid for a specific voyage.
- Mixed Policy: A mixed policy offers a client the benefit of both time and voyage policy together.
- Port-Risk Policy: This ensures the ship’s safety while at the seaport.
- Single Vessel Policy: This is best for small ship owners with one ship. The risk of one vessel is protected.
- Open or Unvalued Policy: The value of the cargo and shipment is not submitted in the policy beforehand. So reimbursement will be done after the loss of the haul is valued and inspected.
Other insurance policies include Wager Policy, Floating Policy, Block Policy, Fleet policy and more.
Principles of Marine Insurance
To ensure the proper performance of a marine insurance contract, the insurer and the insured must uphold these five principles:
Principle of Utmost Good Faith
This foundational principle means both parties involved in an insurance contract must act in good faith towards each other. They must provide transparent and concise information relating to the terms and conditions of the contract.
Principle of Indemnity
This principle only covers the extent of the loss, so the insured cannot get more than the amount estimated from the loss. The purpose is to put the insured in good standing before the warranty.
Principle of Causa Proxima
Causa Proxima can also be called proximate cause or nearest cause. This principle applies when multiple incidents cause a loss. The insurance company must find the closest cause of the loss. This is to help analyze the real cost of damage.
Principle of Insurable Interest
The policyholder must have some insurable interest for the item or subject he wants to insure. It means that the insured must provide some insurable gain or profit and must also lose when there’s a damage or an accident.
Principle of Loss Minimisation
This principle applies to the owner of a property, making it obligatory to take necessary steps to reduce the loss to the insured property. This means the owner cannot be irresponsible or negligent because the property is insured.
Benefits Of Marine Insurance
- Marine insurance helps to manage the risks that come with the business.
- It lessens the risk of cargo theft.
- It provides financial stability to the business in the case of mishaps.
- There are several options to choose from, and you can customise your policy to fit your needs and budget.
- Most providers offer claim survey assistance globally, including claim settlement assistance.
- It can help to save for the long term. Therefore, it offers you a chance to create wealth for other future goals.
What Is Not Covered Under Marine Insurance?
Marine insurance typically covers businesses that operate in the water; ranging from trade, travel, or leisure. However, there are exclusions:
- Loss or damage due to negligence on the part of the insured (see Principle of Loss Minimisation)
- Damage from biochemical, biological or chemical reactions
- Ruin or misplacement caused by inappropriate packing
- Financial default or bankruptcy on the part of the owners and managers of the vessel
- Ordinary leakages or regular wear and tear
- Intentional damage or damages from a delay
Ready to shop for marine insurance?
Here at Leadway, we have a range of marine insurance products to cover your vessel or fleet against physical damage while in transit over water. Looking to do more in-depth research to find the one that works for you, request a callback today, and our team of financial advisors will reach out to you.