Marine insurance covers the losses or damage caused to ships and terminals or to any mode of transport of cargo used to transfer, acquire, or hold goods between different points of origin and the final destination. The term may also apply to inland marine transit but usually using the context of ocean marine transportation. Marine insurance is important for transporters and shipping companies because it helps to lower the financial loss due to loss of cargo.
Through Marine insurance shipowners and other transporters can claim cover for damages in case of a mishap. Sometimes, despite following all safety regulations, losses or damage arise from consignments or the ship itself. Along with natural hazards like sea perils, which have the potential to impact the cargo and vessel, there are other incidents that could also cause a major financial loss to the transporter. For instance, piracy and hostile shootouts are prevalent when it involves water transportation, and therefore, to avoid any such loss or damage, it is in the interest of the transporter to buy marine insurance.
Features of a marine insurance policy –
Open Policy –
An inland marine insurance policy covers the inland movement of a consignment for a specified duration of time, which is generally one year. The policy is relevant for companies that involve in multiple transactions around the year as it offers continuous cover.
Comprehensive Coverage –
The policy offers protection against various types of losses or damages like a total loss of goods, partial loss of goods, related expenses whilst in transit, etc.
Customized Policy –
As per the business requirement and time for which coverage is sought, a marine insurance policy can be customized.
Mark up Value –
The policy allows a portion of profit to be included in the sum insured. It is a markup in the marine insurance industry.
It becomes important to file a marine insurance claim immediately with the insurer, in case of destruction or damage, of goods or something else. Once done, the insurer will make all efforts to find out whether reasonably cared, while transporting goods. In order to ensure no deliberate efforts were made just to file a claim.
Here it is important to understand that just because you have a marine insurance policy, it doesn’t mean you can act carelessly. You are expected to take care of your goods in the same manner as you would have done in the absence of the insurance policy. Also, there is a time window of usually one year for filing a claim with a marine insurance company in case of any loss or damage.
Though marine insurance offers comprehensive cover, there are some instances,
not covered under the policy, like,
- Loss or damage due to willful negligence
- Loss or damage due to improper packaging
- Removal of wreck
- Contamination due to radioactivity
- Loss or damage due to riot, strike, civil commotion, etc.
For a Detailed exclusion list, Read: What is not covered Under Marine Insurance?
Case Study: 1
Incepted in 2014, M.K.G Engineering exported a consignment of engineering products. However, upon arrival of the cargo, the buyer refused to take the delivery. As he found some damaged goods and not as per the contractual agreement.
Luckily, M.K.G Engineering had a marine insurance policy and they approached the insurance company for the claim settlement. Once the company submitted all the required documents and the claim form, the insurer appointed a surveyor to assess and compute the damage. The surveyor found damaged goods, despite good packaging. The reason was goods came into contact with seawater. After reviewing all the documents, the insurer settled the claim as per the actual loss. Which was within the coverage limit.
Case Study: 2
As J.S Automobile exports various automobile parts in different branches of the company via sea. The company has purchased a marine insurance policy to secure its consignment against various types of perils like earthquakes, storms, floods, etc.
Last month, when the company was exporting goods to a buyer situated in Malaysia via sea. The ship caught up in heavy rainfall, damaged, and delayed the consignment. Upon reaching the destination, the buyer refused to take the delivery of the cargo. At this point, the marine export and import insurance policy bought by J.S Automobile came to their rescue. The company approached the insurer who appointed a surveyor for calculating the damages. Later, based on the documents and the surveyor’s report, the insurer settled the claim.