Types of Marine Insurance

There are four main kinds of marine insurance policies. They are:

1. Freight Insurance

This type of marine insurance deals with the loss of freight or cargo due to perils of the sea or other causes during transit. Freight insurance can be taken by the shipowner, the consignor, or the consignee, depending on who bears the risk of cargo loss. This insurance can be either specific or open, depending on whether it covers a single shipment or multiple shipments under a single policy.

2. Liability Insurance

This type of marine insurance policy deals with the insured's legal liability from bodily injury or asset damage to third parties due to the insured's or their agents' negligence or fault during maritime operations. Liability insurance can be taken by shipowners, charterers, operators, managers, or other parties involved in maritime activities. Some of the common types of liability insurance are:

Protection and Indemnity (P&I) Insurance

This is a type of liability insurance that covers the shipowner's legal liability for personal injury, death, illness, or loss of or damage to property of third parties, as well as pollution, collision, towage, salvage, and other maritime risks.

Suppose a shipowner's vessel causes oil spillage in the sea, damaging the marine environment and other vessels. In that case, the shipowner can claim P&I insurance to cover the clean-up costs and compensation.

Charterers' Liability Insurance

This type of liability insurance covers the charterer's legal liability for loss of or damage to the chartered vessel, cargo, or third parties arising from the charterer's negligence or breach of contract.

For example, suppose a charterer hires a vessel and causes damage to it by loading improper cargo or providing an unsafe berth. In that case, the charterer can claim the charterers' liability insurance to cover the costs of repair and indemnity.

Ship Repairers' Liability Insurance

This type of liability insurance covers the ship repairer's lawful liability for loss of or deterioration to the vessel or its equipment under the repairer's care, custody, or control.

For example, suppose a ship repairer damages a vessel's engine or hull while performing repairs or maintenance. In that case, they can claim ship repairers' liability insurance to cover the costs of restoration and compensation.

3. Hull Insurance

This marine insurance policy covers the loss or deterioration of a vessel's hull and machinery due to the sea's perils or other causes. Hull insurance can be taken by shipowners, mortgagees, or other parties with an insurable interest in the vessel.

This kind of plan can be either total loss only (TLO) or all risks, depending on whether it covers only the total loss of the vessel or partial loss or damage.

4. Marine Cargo Insurance

Marine cargo insurance, as the name implies, covers the loss or damage to goods or merchandise being transported by sea due to perils of the sea or other causes. This plan is ideal for exporters, importers, buyers, sellers, or other parties with an insurable interest in the cargo.

Marine cargo insurance can be either specific or open, depending on whether it covers a single shipment or multiple shipments under a single policy.

Apart from the main types of marine insurance policies discussed above, some other types cater to specific needs and situations. Some of these are:

Floating Policy

A floating marine insurance policy is a type of marine cargo insurance policy that covers multiple shipments under a single policy without specifying the details of each shipment at the time of taking the insurance.

You must declare the details of each shipment as and when they occur during the policy period. This marine insurance suits frequent shippers who do not want to take a separate policy for each shipment.

Voyage Policy

This plan covers a specific voyage from one port to another. The policy terminates when the voyage ends. A voyage policy can cover either hull, cargo, or both. This type of insurance requires extra effort in buying cover every time a new consignment is dispatched. In contrast, purchasing an open policy will automatically cover the shipment.

Time Policy

This policy covers a specific time, usually one year. The policy covers any voyage undertaken by the insured vessel during the policy period. A time policy can cover either hull, cargo, or both.

Suppose your order is out for shipment, but your policy is due to expire before the consignment reaches its destination. Then, based on your insurer policy, you may extend the coverage tenure.

Mixed Policy

A mixed policy combines both voyage and time policies. The policy covers a specific voyage for a specific time. A mixed policy can cover either hull, cargo or both.

Named Policy

A named policy covers only those perils that are specifically named in the policy document. The policy does not cover any other perils that are not named. This plan can cover either hull or cargo or both.

Port Risk Policy

A port risk policy is a type of marine insurance policy that covers the risks of a vessel while it is in port or at anchor. However, it does not cover the risks of the vessel while it is at sea. A port risk policy can cover either hull, cargo, or both.

Fleet Policy

A fleet policy is a type of marine insurance policy that covers a group of vessels owned by the same insured under a single policy. The policy covers all the vessels in the fleet for the same perils and conditions. A fleet policy can cover either hull, cargo, or both.

Single Vessel Policy

It covers only one vessel owned by the insured under a single policy. The policy covers the vessel for the perils and conditions specified in the policy document. Again, this plan covers either hull or cargo or both.

Blanket Policy

It covers all your shipments under a single policy without specifying the details of each shipment. Here, you pay a fixed premium based on the estimated value of all the shipments during the policy period. A blanket policy is suitable for shippers with a large and variable volume of shipments.

Wager Policy

There are no fixed clauses regarding reimbursements in this plan. Following the loss assessment, if the insurer considers the claim to require compensation, only they pay for it; otherwise, they do not. This type of plan is extremely rare on the market. Since it is not a written plan, it is also void in a court of law.

Marine insurance is vital to maritime trade and transportation, providing financial security and peace of mind to the parties involved. Various types of marine insurance policies are available in the market, each with its features and benefits.

As an insured, you should choose the type of marine insurance policy that best suits your budget and requirements, considering factors such as the nature and value of the property, the mode and route of transportation, the frequency and duration of shipments, and the extent and scope of coverage.

By doing so, you can ensure sufficient protection against the risks and losses associated with maritime transport. Tata AIG provides marine insurance to offer comprehensive coverage at affordable premium rates with customisable coverage options.

What is marine insurance meaning?

Marine insurance protects ships, their consignment, and the loss to the third party or nature. There is a further classification of marine insurance depending on the subject matter insured and the time duration. Marine insurance also covers air, rail, and road transportation.

Is marine insurance expensive?

It can vary, but it is usually a small part of the overall cost of shipping. The price depends on the value of what is being insured and the risks involved.

What factors affect the cost of marine insurance?

The cost depends on the type of vessel, the cargo, the voyage route, and the history of the insured party. Riskier voyages or cargoes usually result in higher premiums.

Is marine insurance mandatory?

In many cases, yes. Some countries and international regulations require shipowners to have insurance to cover certain liabilities.

How do I make a claim on my marine insurance?

In case of an incident, contact your insurance provider promptly. They will guide you through the claims process, which usually involves submitting a claim form and supporting documents.