What Is Marine Insurance and Its Types?
Marine insurance provides coverage for ships, cargo, terminals, depots, and all modes of transit through which goods are transported, acquired, or stored from their point of origin to their final destination.
It protects ships, cargo vessels, terminals, and other transportation methods involved in moving goods between multiple locations and the final delivery point. By covering transportation-related risks, marine insurance safeguards shipping companies, exporters, importers, and logistics providers from potentially heavy financial losses.
Although the term “marine” originated from sea transport, marine insurance today covers cargo movement by sea, air, rail, and road. One of the key advantages of marine insurance is its flexibility, transporters can choose policies tailored to their specific industry, cargo type, ship size, and routes covered.
Before exploring marine insurance and its types, let us first understand its features and the procedure involved.
Features of a Marine Insurance Policy
A marine insurance policy covers ships, cargo, terminals, and any mode of transit through which goods are moved or stored between the place of origin and the final destination. Cargo insurance, a type of marine insurance, protects goods exposed to risks during coastal and offshore transport.
Marine insurance can cover:
Container terminals and ports
Oil platforms and pipelines
Ship hulls and machinery
Maritime casualties and marine liabilities
Shipping insurance is commonly used when goods are transported via courier or postal services.
The Marine Insurance Act of 1963 governs marine insurance contracts and imposes strict compliance requirements. Marine insurance policies are legally binding agreements with clearly defined terms and conditions. Even minor deviations from policy conditions may lead to claim rejection.
Insurers follow strict procedures when settling claims, and failure to adhere to policy requirements can result in loss of coverage. Therefore, it is essential to fully understand policy features and obligations.
A marine insurance contract is valid only if an insurable interest exists. Any person whose goods are being transported by sea and may suffer a loss has an insurable interest.
Once the insurer reviews the proposal and contractual terms, the policy is issued. Even if a formal policy document is not issued immediately, coverage may still arise from a valid contract.
Types of Marine Insurance
Marine insurance is broadly classified into the following types:
Hull Insurance
Hull insurance protects vessels against damage or accidents. It covers the ship’s structure, body, and equipment, along with certain onboard items.
Machinery Insurance
Machinery Breakdown Insurance covers unexpected physical loss or damage to machinery. This includes factory equipment, generators, compressors, industrial lathes, drills, and workshop machinery.
P&I (Protection and Indemnity) Insurance
P&I insurance covers liabilities arising from personal injury, illness, or death of crew members, passengers, and third parties. It also includes liability claims related to accidents and the cost of wreck removal.
Liability Insurance
This insurance covers legal liabilities that may arise due to collisions or accidents involving the insured vessel.
Freight Demurrage and Defense Insurance (FD&D)
FD&D insurance provides legal assistance and reimbursement of legal expenses in disputes related to owning and operating a vessel. Coverage can extend up to USD 5 million for disputes not covered under other insurance policies.
Freight Insurance
Freight refers to the payment made to a ship owner for transporting goods from one port to another. Freight insurance protects against financial loss of freight income if goods are lost due to accidents or collisions during transit.
Marine Cargo Insurance
Marine cargo insurance protects goods against physical damage or loss during transportation by land, sea, or air. The insurer compensates the cargo owner for losses incurred during transit. When managed correctly, this insurance also offers cost savings and risk mitigation for businesses.
Conclusion
Marine insurance is essential for importers and exporters involved in domestic and international trade. It provides comprehensive coverage against transit-related risks, protecting shipments from the moment they leave the seller’s warehouse until they reach the buyer’s warehouse. By securing marine insurance, businesses can ensure financial stability and uninterrupted trade operations.
WELFIN INSIGHT
“The right insurance amount is not the cheapest or the highest it’s the one that fits your life.”
