Types of marine insurance
There are several types of marine insurance, each designed for specific shipping risks. Understanding these policies can help businesses and individuals make informed decisions about securing their cargo, vessels and freight against unforeseen losses.
1. Hull insurance
Who needs it: Shipowners, fleet operators and maritime businesses.
This policy is meant for shipowners and covers damages to the vessel caused by accidents, natural disasters or collisions. If you're in the shipping business, hull insurance is a must to protect your vessel from unexpected repair or replacement costs.
Coverage:
- Damage due to collisions, storms, or fire
- Theft or vandalism
- Engine breakdowns due to covered risks
- Accidents leading to partial or total loss of the vessel
2. Cargo insurance
Who needs it: Exporters, importers, logistics companies and manufacturers.
Cargo insurance is vital for businesses that rely on transportation for their goods. It covers loss or damage to cargo because of theft, fire, sinking or other unforeseen circumstances. Without this policy, exporters and importers could suffer huge financial losses.
Coverage:
- Loss or damage owing to accidents, theft or piracy
- Damages during loading and unloading
- Natural disasters affecting the cargo
- Coverage for specific routes or transit periods
3. Freight insurance
Who needs it: Shipping companies, freight forwarders and logistics providers.
Shipping companies earn money by transporting goods. Freight insurance ensures they still get paid even if the cargo is lost or damaged. This avoids income loss and preserves business continuity.
Coverage:
- Non-payment of freight charges due to cargo loss
- Protection for transport companies against financial disruptions
- Compensation for unforeseen risks affecting freight earnings
4. Liability insurance
Who needs it: Shipowners, cargo handlers and logistics service providers.
This insurance covers shipowners and operators against legal liabilities arising from damage to other vessels, injuries to crew members or environmental pollution. Given the strict maritime laws, liability insurance is essential.
Coverage:
- Compensation for third-party damage claims
- Legal costs arising from maritime disputes
- Employee injuries and compensation claims
- Environmental damage and oil spills
5. Open marine insurance
Who needs it: Businesses with frequent shipments.
Open marine insurance is a convenient option for businesses that ship goods regularly. Instead of buying separate policies for each shipment, this covers all shipments within a specified period, saving time and effort.
Coverage:
- Bulk shipments under one policy
- Continuous coverage for repeated trade routes
- Flexibility in covering different types of goods
6. Specific voyage policy
Who needs it: Businesses that occasionally transport goods.
This is a one-time policy that covers a single journey. If you rarely transport goods, a specific voyage policy is a cost-effective choice instead of a long-term contract.
Coverage:
- Protection for one-time shipments
- Damage due to weather, piracy or accidents
- Customised coverage for high-value shipments
7. Floating policy
Who needs it: Companies with high shipping volumes but variable cargo types.
A floating policy is useful for businesses that frequently ship goods. Instead of declaring every shipment separately, they can take a bulk policy that covers multiple shipments.
Coverage:
- Covers multiple shipments without separate declarations
- Flexible terms based on trade volume
- Protection against sudden cargo damages
8. Time policy
Who needs it: Shipowners and transport companies with long-term operations.
A time policy covers the insured asset (vessel or cargo) for a specific period, typically one year. It’s ideal for businesses that require continuous protection over a set duration.
Coverage:
- Comprehensive protection for vessels for a fixed time
- Coverage against accidental losses, damages and liabilities
9. Mixed policy
Who needs it: Companies that need flexible coverage for different shipping needs.
As the name suggests, a mixed policy combines the features of voyage and time policies, offering broader coverage. It is useful for businesses with varied shipping needs.
Coverage:
- Hybrid policy with elements of voyage and time insurance
- Tailored protection for businesses with dynamic operations
10.Port risk insurance
Who needs it: Shipowners with vessels stationed at ports for long durations.
Ships that stay in a port for extended periods face risks like theft, vandalism, or natural disasters. Port risk insurance covers damages while the vessel is docked.
Coverage:
- Protection against theft and fire at ports
- Covers port-based damages like collisions and accidents
11.War risk insurance
Who needs it: Ships travelling through conflict-prone areas.
Maritime routes may sometimes pass through conflict-prone areas. War risk insurance protects against damages caused by war, piracy, and civil disturbances.
Coverage:
- Losses due to war, terrorism or civil unrest
- Coverage for crew and cargo against violent disruptions
12.Construction risk insurance
Who needs it: Shipbuilders, ship repair companies and investors.
This covers damages to ships under construction. Given the significant investment involved in building a vessel, this policy is vital for shipbuilders and financiers.
Coverage:
- Protection for ships under construction
- Damage due to design flaws, accidents or natural calamities
Conclusion
Understanding the type of marine insurance policy you need is vital for businesses that rely on shipping. Whether you own a vessel, transport cargo, or operate a shipping company, selecting the right marine insurance policy protects you from financial losses.
In the shipping industry, regularly reviewing your insurance coverage is key. The right policy helps mitigate risks, ensure compliance with maritime laws and safeguard your business interests.
Disclaimer: The information provided in this blog is for educational and informational purposes only. 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 on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.