Marine insurance policies are widely used to protect goods in transit, but many policyholders are unaware of how they actually work. Here are 10 important facts you should know before buying one.
- Covers More Than Sea Transport: Despite what the name implies, marine insurance is not restricted to ships and oceans. It may also protect goods transported by road, rail, air, inland waterways, and multimodal transit.
- Discloses All Material Information: Marine insurance is based on the principle of utmost good faith. This means policyholders must honestly disclose all material information about the cargo, transit route and associated risks.
- Compensates Only for the Actual Loss: Marine insurance operates on the principle of indemnity, meaning the insurer compensates only the actual financial loss suffered, up to the sum insured and as per the policy terms.
- Shared Losses During Emergencies: If part of the cargo has to be sacrificed to save the vessel or the remaining cargo during an emergency, all stakeholders involved in the transport may share the resulting loss under the principle of general average.
- Covers Natural Calamities and Piracy: Depending on the policy, losses caused by storms, cyclones, sinking, collisions, and even piracy may be covered.
- All-Risk Cover Doesn't Mean Every Risk Is Covered: Remember that certain losses remain outside the scope of coverage of even an all-risk marine insurance policy.
- One Policy Doesn't Suit Every Shipment: Choose between the types of marine insurance based on your type of cargo, mode of transport, destination, and shipment frequency.
- One Must Have an Insurable Interest: You can claim compensation only if you have a financial interest in the insured goods at the time the loss occurs.
- Strict Warranty Conditions: Policyholders must comply with the policy's warranty conditions. Failure to do so may mean claim rejection or reduced compensation, subject to terms and conditions.
- Insurance Can Also Cover Expected Profit: Marine insurance can be arranged to cover not only the value of the goods but also the expected profit on the shipment, subject to the policy terms. For example, if the cargo is valued at ₹10 lakh and the expected profit is 10% (₹1 lakh), the policy valuation may be ₹11 lakh, depending on the agreed policy terms.
How to Choose the Right Marine Insurance Policy
There are a fair number of options out there, but to choose the right policy, consider the following factors:
- Choose a policy based on the mode, frequency, and destination of shipments.
- Pick coverage that matches the nature and value of your cargo.
- Understand what risks and losses are not covered.
- Insure the cargo for its appropriate value to avoid underinsurance.
- Choose an insurer known for efficient and hassle-free claim processing.
Conclusion
Marine insurance policies help businesses stay protected from the financial losses that can arise while transporting goods across domestic and international markets. By covering transit-related risks, they greatly support business continuity and smoother trade operations. The right policy can also help fulfil contractual obligations and support commercial requirements.
FAQs
1. Who should buy a marine insurance policy?
Exporters, importers, manufacturers, wholesalers, logistics firms, retailers, and anyone regularly transporting goods can benefit from marine insurance.
2. Is marine insurance mandatory for transporting goods?
Marine insurance is not generally a legal requirement for transporting goods. However, it may be required under your sales contract, certain Incoterms or a letter of credit.
3. Can I buy marine insurance for a single shipment?
Yes, you can buy marine insurance for a single shipment.
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Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure/policy wordings carefully for detailed information about risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.