It is highly likely that the concept of insurance started with marine insurance. It is still is an essential part of export houses and other businesses today involved in the transport of goods. The insurance covers the loss or damage of ships, cargo, terminals. It also covers the loss of transport or cargo which transfers property, 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. Let’s read about the clauses an exporter should consider while buying Marine Insurance.
In a marine policy, risks are termed as perils and these risks/perils include-
- Maritime Perils: they include events created by God as well as manmade events. The first one includes- earthquakes, collisions, storms, and lightning. Instances of entry of seawater into the vessel, volcanic eruption, rainwater damage, and washing overboard of cargo are also considered as perils. While manmade events include- fire, smoke, water used to extinguish the fire, piracy, sabotage, vandalism, etc
- Extraneous Perils: these perils 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, goods seized by customs due to smuggling charges are not covered
- Strike Perils: this includes damage or loss caused due to lockouts, strikes, labor disturbances, riots, and civil commotion. It also covers loss occurring due to any terrorist acting from a political motive.
Different clauses in the marine insurance policy for 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
- Clause B: This policy compared to clause “A” covers lesser of the risks
- Clause C: This policy provides the least risk cover
Certain risks are excluded in the above policies and are covered only through paying an additional premium. Risks when specifically added on like- War and Strikes, Riots and Civil Commotion (SRCC) are covered only on extra premium.
Few important clauses to consider during the export of goods
Besides the above risk-based clauses, marine insurance may have various clauses. Here are few important clauses an exporter needs to consider while buying a marine insurance policy. This is important in order to cover various types of risks and avoid future misunderstandings 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 it leaves the port. For example, when the insurance policy mentions, ‘at and from Mumbai”, the policy covers risk from the time the ship is at the Mumbai port and also leaves the port. This clause depending on an exporter’s business needs. It is a necessary element of the insurance policy.
Warehouse to Warehouse Clause:
This clause ensures the exporter about the safe arrival of the goods both at the port and the warehouse. It saves 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. It covers risks when the goods are brought from a close-by vicinity to the port. The clause covers the risk involved in the transfer of goods from the sender’s warehouse to the port, till their arrival at the receiver’s warehouse.
Touch and Stay Clause:
The policy mentions the ports where the ship should go and stay. In cases where there is no mention of ports then the ship needs to follow the customary route. The ship has to stay at only that port that is on that particular customary route. Under this clause, it is a deviation if the ship follows any other port. Hence an exporter needs to keep this in mind if this clause is present in the policy.
Jettison applies in an emergency situation. It entails throwing off certain cargo from a ship to lighten the load of the ship. Jettisoning helps avoid marine peril. The master of the ship decides items to unload from the ship to lighten the load. The general clause covers the Jettisoning loss.
This clause saves 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 losses. However, in case of a general loss or a stranded ship, the insurer is 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 the valuation clause, change of voyage, and others. An exporter may want to consider or look into while purchasing their marine insurance policy. Due to a 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.