Marine insurance premium either increases or decreases based on the risk estimates made by the insurance provider. The major parameters which are involved in the determination of marine insurance premium are listed below.


a. Natural forces

Natural forces or natural calamities like floods, high tides, etc. are permanent and unchanging. However, some are seasonal as well and occur or are highlighted in particular seasons. Or there are natural features for instance there are ports that do not have sufficient depth, do not have good anchorage and even lack protection from tides. This has a huge impact on the premium of your marine insurance.


b. The construction and type of vessel

The construction, quality, and fitness of the vessel or vessels involved are of great importance while determining marine insurance premium. The insurance provider would also be interested to know about the ownership, material used in the construction of the vessel, its structural strength, adaptability in carrying different types of cargo and its age.


c. Nationality of the vessel

Insurance providers would ask to know about the nationality of the vessel as this would help in disclosing its dependency on countries for ocean trade. The nationality of the vessel would help in knowing about the skill of the crew and its masters.  Moreover, premium rates of the vessel would also depend on the age of the vessel and the risks that are covered.


d. Terms and conditions of the policy

Different clauses can be added to either increase or limit the liabilities of the insurance provider. Some of the marine insurance policies might cover total loss whereas some might cover partial losses. Depending on the coverage provided by the marine insurance policy, the premium of the policy is decided.

In addition to these major factors, there are others like the nature of the goods being carried and their value, the destination to which the goods are traveling, any inherent risks the products might face, etc. which also determine the marine insurance policy premium.

Additional Read:  Factors that decide the premium of marine insurance policies

Calculation of insurance premium

 The premium for marine insurance can be calculated by following the below-mentioned steps.

  • First, the shipment value or the cost of freight needs to be determined.
  • Then add 10% for the escalation costs.
  • The total value which is obtained is multiplied with the insurance premium that was quoted by the insurance provider.
  • The final value which is obtained is thus the amount to be payable as premium.

In an open marine insurance policy, the insurance provider can charge the premium at regular intervals depending upon the requirements of the insured.  The rate % which is applied to the sum insured for the calculation of premium depends upon factors like the susceptibility of the goods for any damage or theft, the quality of packaging, the claim history, etc.

Hence, the premium of marine insurance varies from case-to-case and is not calculated on a universal basis. It is mainly influenced by factors like applicable freight incurred for transportation, the route being considered for the voyage, the destination of the goods and other issues that can influence the delivery of goods like riots, commotion or political risks.