Marine Insurance vs Freight Insurance: Key Differences Explained

Marine Insurance

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Marine and freight insurance are essential for shipping, logistics, and transportation businesses. Global trade and shipping of goods expose businesses to various risks and unpredictable conditions. Having adequate insurance ensures protection against financial losses, improves cash flow, and helps businesses comply with contractual requirements and trade regulations. However, businesses need to understand the difference between the two main types of insurance available – marine insurance and freight insurance to avail the right type of protection for their business. Marine insurance and freight insurance differ mainly based on the purpose and type of risk they cover.

What is Marine Insurance?

Marine insurance is designed to protect cargo, shipment, vessels, and associated liabilities during shipping from one place to another via waterways, over land, or via air. There are various types of marine insurance policies available such as open policy, time policy, voyage policy, etc.

Features of Marine Insurance

Here are some features and scope of marine insurance policies:

Marine insurance is based on the principle of indemnity, thus compensating the insured for actual losses incurred, up to the policy limit.
These policies cover a wide range of risks including fire, explosion, theft, natural disasters, and man-made calamities.
Marine insurance requires the policyholder to have an insurable interest in the cargo or vessel. Both insurer and insured must act in utmost good faith.

What is Freight Insurance?

Freight insurance is designed to protect the value of freight charges or transportation costs in case goods are damaged, lost, or delayed during transit.

Features of Freight Insurance

Here are some features of freight insurance policies:

The policy covers transportation risks such as loss or damage caused due to accidents, theft, and natural disasters.
The policy is independent of cargo value and applicable across different transportation modes such as sea, land, or air transportation.

Difference Between Marine Insurance and Freight Insurance

Here are the main differences between marine insurance and freight insurance on various factors.

Factors	Marine Insurance	Freight Insurance
Purpose	Marine insurance policy mainly covers the cargo and vessels used for shipping the goods. Along with the loss to cargo and vessel, it also can include liability cover for third-party property damage or loss.	Freight insurance is designed to protect freight or shipping charges that a carrier charges for the shipment of goods.
Risk	Marine insurance protects the cargo and vessels from many named and unnamed perils such as fire, explosion, theft, natural disasters, and man-made errors like rough handling, negligence, etc.	Freight insurance protects logistics providers and carriers against a wide range of risks that might otherwise result in income loss due to incomplete shipment.
Coverage	Broader coverage is the main marine insurance advantage as it covers the cargo, vessel, and associated liabilities. Freight insurance is also a part of marine insurance. Marine insurance covers both domestic and international shipments.	The coverage is narrower focusing on the shipping charges. Freight insurance in marine insurance applies to the value of the freight costs, rather than physical goods or vessels. It mainly applies to international shipping
Who can benefit?	The owner of the cargo or the vessel primarily benefits from the marine insurance policy.	Carriers or freight forwarders primarily benefit from the freight insurance policy.

Conclusion

To conclude, both marine insurance or cargo insurance and freight insurance are used in international shipping to have comprehensive coverage. The coverage can be customised as per the requirements of the business. Understanding the different insurance products essential for the business helps in making an informed and rational buying decision.

Frequently Asked Questions (FAQs)

Who Can Buy Marine Insurance?

Marine insurance can be purchased by various parties such as owners of goods being transported, importers, exporters, logistic providers, freight forwarders, ship owners, buyers, and sellers involved in the trade.

How are Premiums Determined in Marine Insurance?

Marine insurance premiums are determined based on various factors. That is:

Types of goods (for example, insurance premium is higher for high-value goods as the risk is high)
Shipping route
Mode of transport (waterways/land/air each has different risks and priced differently)
Vessel type, age, and condition
Policy coverage and customisation

Marine insurance premiums and coverage offerings may vary from insurer to insurer. SecureNow helps you compare marine insurance from different providers easily on a side-by-side basis and get it customised at an affordable cost as per your requirements.

Who Typically Needs Freight Insurance?

Freight insurance is useful for shippers, carriers, freight forwarders, importers, and exporters. Some of the trade agreements may mention the mandatory need for freight insurance and marine insurance.

Is Freight Insurance Mandatory in International Shipping?

Freight insurance is not mandatory in international shipping. However, some trade agreements may state that either buyer or seller covers the cost of freight insurance depending on the terms of the trade agreement. Thus, it’s highly useful for carriers or shippers to have freight insurance.