Marine Insurance Policy

As per the Marine Act of 1906, marine insurance is a legal contract between the insurer and the policyholder in which the former provides coverage to the policyholder against any damage or losses that may occur during the transit.

In simple words, the insurance provider or insurer reimburses the insured or policyholder for the losses to the insured cargo during the transit.

Therefore, the Marine Insurance Act states that a marine or transit insurance policy extends its coverage to the transit of cargo via land, air, or waterways.

Like any other insurance contract, a marine cargo insurance policy transfers the liability of the policyholder to the insurance company. The policyholders can be any party dealing with the transportation of goods.

Following are the points displaying the functioning of a marine insurance policy:

• A shipper or a cargo owner purchases a suitable marine insurance plan from a reliable insurance provider before shipping the goods. The good thing about a marine policy is that it can be customised as per the specific requirements of the involved party.

• The main factors that are considered for devising a suitable marine policy include the mode of transportation, destination, type of goods, value of goods, and so on.

• In general, a marine policy covers damages or losses to the goods/cargo due to potential scenarios such as natural calamities like earthquakes, storms, thunder and lightning, as well as man-made risks such as theft, fire and explosions, vandalism, etc.

• Besides, reputed marine insurance providers also offer coverage for improper handling or other mistakes made by the carrier.

• The premium of a marine insurance policy is not fixed. Instead, it is calculated on the basis of the type of policy, type and value of goods, mode of transportation, and so on.

• If the cargo owner or shipper experiences any damage or loss to the goods during transit, he can raise a claim with the insurance provider with respect to their agreed terms and conditions.

• In order to raise a successful marine insurance claim, the insured must provide proof of damage or loss, such as cargo receipts, bills of lading, etc.

• After receiving the claim, the insurance company investigates the case and decides on compensation to be given to the cargo owner or shipper. Once everything is determined, a final settlement is done by the insurance provider by offering the decided compensation to the insured.

Marine insurance policies are divided into different types based on their area of coverage and the structure of the plan. Let's discuss some of the main types of marine policy based on these categories:

Based on Coverage

Following are the some of the common marine insurance policies based on the type of coverage:

Hull and Machinery Insurance: The hull is the most important part of the ship that protects the cargo on it from getting damaged. Thus, the hull and machinery insurance offers coverage for any damage/loss caused to the ship's body or any machinery within it.

This type of insurance policy mainly covers accidents resulting from explosions, collisions, or any other type of natural disaster. This type of coverage is mostly purchased by the owners of a vessel or ship.

Damage Liability Insurance: As the name suggests, this type of insurance covers the liabilities of an insured. These liabilities include injuries or loss to a third party.

Freight Insurance: This type of marine insurance offers coverage to the liabilities of a shipper or a logistics company for any kind of loss or damage that may arise during transit.

**Based on the Plan Structure n

Following are the main types of transit insurance policies based on the plan structure:

Single Transit Policy: This type of marine policy offers coverage for a single transit. This is used by infrequent shippers or those who need to make shipments only a couple of times a month.

Annual Open Policy: This type of marine policy comes with an annual tenure. It covers all the transits made during the course of the policy. It is a very useful policy for those who need to make multiple shipments during a year.

Still, wondering why invest in a good marine insurance policy? Here are some benefits to help you make the right decision:

Broad Coverage: One of the main benefits of marine insurance is that it offers comprehensive coverage for risks that can occur from a variety of unforeseen scenarios, such as poor climate, natural disasters, man-made calamities, personal or third-party injuries, and so on. You can select from a wide range of policies based on your requirements.

Competitive Advantage: Shippers and vessel owners can gain an edge over their competitors simply by having marine insurance. It helps them attract more and more customers, knowing that their goods and valuables are covered against any risks.

Adhere to Legal Requirements: Sometimes, having marine insurance becomes mandatory to transit a vessel via seaways. For instance, in many cases, commercial vessels are required to have a marine insurance policy.

Scope for Customisation: Another benefit of marine insurance is that it can be customised as per your specific requirements. It means you can choose the level of coverage based on your particular needs and budget.

Higher Peace of Mind: By transferring your liabilities to the insurance provider, you can run your business smoothly without worrying about the losses and damages that can harm your profits and reputation.

We have discussed the main elements of marine insurance. For a better understanding, let's now take a look at some of the common exclusions of a marine cargo insurance policy:

• Damage/loss to the goods or cargo due to willful misconduct.

• Damage/loss to the goods or cargo due to ordinary wear and tear.

• Damage/loss to the goods or cargo due to improper packaging.

• Damage/loss to the goods or cargo due to financial default or insolvency.

Following is the list of businesses or individuals who should consider investing in marine insurance:

Ship Owners: Ships, regardless of their type and size, are exposed to a variety of risks. Thus, to safeguard your vessel against any damage during the transit or when it is docked, you should have a comprehensive marine insurance policy.

Freight Forwarders: Freight forwarders are other obvious candidates for a marine cargo insurance policy. Not only do they arrange the transportation of goods to different destinations, but they are also responsible for the safety of goods being transported. Thus, they require marine insurance to get sufficient coverage against the potential risks.

Shipbuilders and Repairers: If you are a shipbuilder or repairer, then you need a marine insurance policy that offers coverage for risks associated with the repair, maintenance, or construction of ships. This includes both personal damage and damage to the vessel.

Exporters: Exporters are the primary users of marine transport insurance as they are responsible for transporting large volumes of valuable goods. So, if you are in an export business, then you should have a suitable marine policy to make sure that your goods are delivered to the destination without incurring any loss or damage.

Individuals Who Make Frequent Overseas Shipments: Even if you are not a shipper but need to make shipments overseas, then you must consider purchasing marine insurance to make sure your goods are delivered to the desired destination in a safe and secure manner.

Marine insurance acts as a safety net for individuals and businesses involved in marine transportation. By offering coverage against a variety of risks, it makes sure that you do not have to deal with the losses or damages on your own.

So, based on your transit insurance requirements, go ahead and invest in a suitable marine insurance policy.

Contact us for more information on our Tata AIG marine insurance plans!