Marine insurance is a contract between an insurance company and insurer whereby the insurer agrees to indemnify the insured in a manner, thereby agreed, against the marine losses.
A marine insurance contract has the following elements-
1. Features of a general contract – All the elements of a general insurance contract exist in a marine insurance contract as well.
- Proposal: The prospect insurance applicant prepares a slip at the time of approaching the insurance company. Proposal forms, so common in other insurance kinds, are unknown in marine insurance and only the ‘original slip’ is considered for the proposal. The slip can be accompanied with other important documents as per the insurer’s requirements.
- Acceptance: It is given to the insurer who accepts the proposal. But the contract can’t be legally enforced until a marine insurance policy is not issued. The slip acts as evidence that the insurer has accepted the proposal and has also subsequently agreed to sign the policy as per the terms and conditions specified on the slip.
2. Consideration – Here, the premium is called consideration which is computed on the basis of the assessment of the proposal form and it is paid at the time of the contract.
3. Policy Issuance – Once the premium is paid, the insurer issues the policy which is sent to the policyholder.
4. Insurable Interest – It establishes that an insured has an insurable interest in the subject-matter in such a way, that he may benefit by the safety or the arrival of the insurable item or may be affected by its loss or damage.
See: Reasons to buy marine insurance policy
5. Utmost Good Faith – The insurance contract is based on the principle of utmost good faith. It means, every person who enters into an agreement of insurance has a legal obligation to act with honesty towards the insurance company. It means, a person should always be truthful and accurate while giving information to the insurer. Also, the insurance company is expected to act in good faith while dealing with its policyholders.
6. Doctrine of indemnity – Marine insurance is an indemnity policy under which the insurer agrees to compensate for loss or damage in consideration of the timely payment of premiums.
7. Doctrine of Subrogation – The aim of this act is that the policyholder should not get more than the actual loss or damage. While settling the claim, the insurer has all rights to reduce the sum received by the insured from the third-party.
8. Warranties – It is that by which the assured undertakes the responsibilities that there are some particular things which shall or shall not be done. It means, these are such statements according to which the policyholder promises to do or not to do certain things or to fulfill or not to fulfill certain conditions. These are more stringently detailed because the insurance contract can come to an end in case a warranty is broken, even if the warranty was material.
9. Proximate Clause – It is a key principle of insurance and is mainly concerned with how the loss or damages happened and whether they happened due to an insured peril. The insurer will be liable to compensate for any loss or damage proximately caused by insured perils.
10. Assignment – It is feasible to assign the insurance policy unless it contains terms which expressly prohibit the assignment. A marine insurance policy can be assigned by endorsement thereon or some usual manner.
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