It is highly likely that the concept of insurance started with marine insurance; and still is an essential part of export houses and other businesses today involved in transport of goods. The insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination. A Marine Insurance Policy may be written to include not only goods to be shipped via ocean, but also shipped via air, truck, rail or other conveyance.
In a marine policy risks are termed as perils; these risks/perils include-
- Maritime Perils- they include events created by God as well as manmade events. The first one includes- earthquake, collision, storm, lightning, and entry of sea water into the vessel, volcanic eruption, rain water damage and washing overboard of cargo. While manmade events include- fire, smoke, water used to extinguish fire, piracy, sabotage, vandalism, etc
- Extraneous Perils: these are perils which are incidental and are caused due to faults in loading, carrying and unloading
- War Perils: these include losses occurring due to war in including civil war, revolution, rebellion and detainment of the carrier etc. However if goods are seized by customs due to smuggling charges then they are not covered
- Strike Perils: this includes damage or loss caused due to lockouts, strikes, labor disturbances, riots, and civil commotion and by any terrorist acting from political motive
Different clauses in marine insurance policy in respect of risk coverage
Varied marine insurance policies have different risk coverage based on various institute clauses-
- Institute Cargo Clause A: This policy provides the most cover and generally covers all the risks of loss or damage to goods
- Institute Cargo Clause B:This policy compared to clause “A” covers lesser of the risks
- Institute Cargo Clause C: This policy provides the least risk cover
There are certain risks which are excluded in the above policies and can be covered only through paying additional premium when specifically added on like- War and Strikes, Riots and Civil Commotion (SRCC)
Few important clauses to be considered during export of goods
Besides the above clauses based on risk; a marine insurance may have various clauses. Here are few important clauses an exporter needs to consider while buying a marine insurance policy, in order to cover various types of risks and avoid future misunderstanding or disputes.
- ‘At and From’ Clause:
This clause is applicable for Hull and Freight Insurance. It basically covers risk in relation to the time when the risk starts. As per the clause the risk coverage commences from when the ship is present at the port of its departure and from the time is leaves the port. So for example if the insurance policy states that the insurance is, ‘at and from Mumbai”, it means the risk is covered from the time the ship is at the Mumbai port and also when it leaves the port. This clause depending on an exporter’s business needs; could be a necessary element of the insurance policy.
- Warehouse to Warehouse Clause:
This clause ensures the exporter about the safe arrival of the goods not only at the port but also at the warehouse, saving the shipper from a lot of difficulties. The clause covers the risk from the warehouse of the shipper or consignor to the destination warehouse. Hence one marine policy manages to cover the risk at land and at sea; in the case when the goods need to be brought from a close by vicinity to the port. Due to the clause the risk involved in taking goods are covered – from the sender’s warehouse, to the port, right up to their arrival at the receiver’s warehouse.
- Touch and Stay Clause:
The policy mentions the ports where the ship should go and stay, and in the case where any ports are not mentioned then the ship needs to follow the customary route and stay at only that port which is on that particular customary route. Under this clause if the ship follows any other port it would be considered as deviation. Hence an exporter needs to keep this in mind if this clause is present in the policy.
Jettison basically is done in an emergency situation and entails throwing off certain cargo from a ship to lighten the load of the ship. Jettisoning is only done when required to avoid a marine peril. It is done deliberately and the decision of what needs to be unloaded is left to the master of the ship. Jettisoning loss is covered under the general clause.
- Memorandum Clause:
This clause is used to save the insurer from paying small losses on perishable goods. At times perishable goods are part of the insurance and this clause states that the insurer is not liable for partial loses; but in case of a general loss or ship being stranded the insurer will be liable to pay the loss. However the exporter needs to keep this clause in mind as for certain commodities the insurer is not liable to pay for partial losses up to as much as 50%.
Besides this there are various other clauses like – valuation clause, change of voyage and others; that an exporter may want to consider or look into while purchasing their marine insurance policy. Due to shortage of time; exporters may find it difficult to take out time to understand the importance of all the various clauses present in the contract. Insurance companies like Secure Now and other insurance advisors possess valuable expertise and know-how in guiding the exporter on the different types of clauses available while buying the policy.
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