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Is Marine Insurance Mandatory?

  • Author :
  • TATA AIG Team
  • Published on :
  • 12/04/2024
  • 2 min read

Ships are one of the oldest and most common forms of transportation. Historically, they were widely used for transportation of commercial goods, travelling, etc. The sea route had different challenges and setbacks.

However, with the advancement of technology, modern navigation techniques are now available, making sea transportation easy. Unfortunately, situations can occur without warning.

That’s why businesses involved in sea transportation consider purchasing a marine insurance policy. The policy provides coverage for loss or damage to cargo, marine vessels, and related liabilities. It is designed to protect cargo or vessels from financial loss due to damage or loss to the insured property.

However, one question arises: Is marine insurance mandatory for business owners? In this blog, we will answer that question and learn about different plans for marine insurance in India.

What is Marine Insurance

Marine insurance meaning is often considered a policy for sea transportation goods, but it also provides coverage for rail, air, and road transportation. The policy covers the loss or damage of goods, vessels, etc., during transit.

Marine insurance is essential for businesses as it reduces the financial implications of unforeseen emergencies. The policy is regulated by the Insurance Regulatory and Development Authority of India (IRDAI).

Is Marine Insurance Mandatory?

The marine insurance policy is governed under the Marine Insurance Act of 1963. As per Section 5 of the act, any business or entity with an insurable interest can be subject to a marine insurance contract.

In simple words, the policy is mandatory in India for a business involved in transportation and commercial activities. Besides the legal requirement, having a policy protects the financial interests of shipowners and cargo owners by providing coverage for the loss or damage of vessels, cargo, and other maritime assets.

Without insurance, these parties could face significant financial losses in the event of accidents, collisions, or other maritime incidents.

Types of Marine Insurance Policy

There are different types of marine insurance policies which are listed below:

Hull Insurance: Hull insurance provides protection against physical damage to a vessel or ship, such as equipment or machinery failure, and more. The policy also protects against risks such as sinking, collision and grounding.

The hull insurance is classified into types which are voyage and time policies. The time policy is usually covered for the specified period, whereas voyage policies cover the particular voyage. Freight Insurance: Another type of marine insurance is freight insurance, which is a loss or damage suffered by the charterer or ship owner due to loss or damage to cargo.

In such insurance, policyholders will get protection against cargo damage, delay in delivery, and non-delivery. This insurance policy is further classified into net freight and gross freight policy. The net freight policy provides coverage for the net freight value after deducting the expenses incurred in earning the freight, while gross freight policy provides coverage for the entire freight value.

Cargo Insurance: Cargo insurance policy protects goods transported via vessel. The goods are being protected against various risks such as damage, theft, loss of cargo and more in the policy.

The cargo insurance policy is further classified into two types: inland transit and export or import transit. The inland transit covers the transportation of goods via land, water, or rail within the country.

While the import or export insurance offers coverage for goods transportation via air, sea, or land during international transit.

How Does Marine Insurance Work?

When businesses buy a marine insurance policy, the liabilities of goods are transferred to the insurance provider. It means if, during the transit, something happens to the cargo or goods, then the insurance company will reimburse for the loss or damage.

However, before reimbursing the claim, the insurance provider will assess the reason for damage, covered peril and other things. The compensation amount is generally based on the policy purchase and value of goods.

Having a marine insurance policy is a prerequisite in international trade. Below is the step-by-step process of how a marine insurance policy usually works.

  • The very first step is the vessel or cargo owner purchasing a marine insurance policy before the intended voyage. The policy is customised based on the business requirements and specifications.

  • The premium of the purchased marine insurance policy is computed based on several factors such as mode of transpiration, risks involved, value of goods and more. The policyholder will pay the premium to the insurance company at the time of purchase.

  • If the damage or loss happened to the cargo or insured goods, the policyholder can file a claim for a policy with the insurance provider. For filing a claim, a proper set of documentation needs to be presented by the policyholder such as policy paper, cargo receipt, bill of lading, and more.

  • After filing a claim, the insurance provider will verify the document and assess the extent of the damage caused by the accident. Based on that, they will decide the compensation amount.

  • The compensation amount will be sent directly to the policyholder.

The whole process may take some days as insurance companies need to follow the protocols. If the company finds any discrepancy in the document, they can also reject the claim request.

What is Not Covered Under Marine Insurance Policy?

Some things are not covered under the marine insurance policy.

  • The marine insurance policy does not provide coverage for damage or loss to insured goods due to improper packaging.

  • If the container is unfit to carry the goods then it is not covered under the marine insurance policy.

  • If the loss or damage to the cargo or insured goods is the policyholder's intentional act, it will not be covered under the policy.

  • The insurance provider does not provide coverage for the mishandling of goods during transit.

  • The loss or damage to goods due to overloading or carrying goods beyond the decided capacity.

  • The policy does not provide coverage for temperature-sensitive goods.

  • Besides this, the marine insurance policy does not provide coverage for loss or damage of goods due to nuclear fission or radioactivity.

  • The ordinary wear and tear of the goods are not covered under the marine insurance policy.

  • Lastly, the policy does not provide coverage for damage to goods due to delay.


Having a marine insurance policy is essential for business owners. It is mandatory as many contracts related to maritime activities, such as charter parties and shipping agreements, require the parties involved to have adequate insurance coverage.

Failure to obtain insurance as specified in the contract could result in a breach of contract and legal disputes.

There are various types of marine insurance policies available, such as hull insurance, cargo insurance and more. Tata AIG offers marine or transit insurance plans that are cost-effective and cater to business needs.


What is the principle of insurance in the Marine?

The marine insurance policy follows the fundamental principles of insurance, which are the principles of indemnity, good faith, proximate cause, subrogation, contribution, and more.

Who pays for marine insurance?

Businesses involved in maritime activities, such as cargo owners and ship owners, generally pay for the purchased marine insurance policies.

Do you need marine insurance?

The need for marine insurance depends on various factors, including involvement in maritime activities, the nature of cargo, risk tolerance, and contractual obligations.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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