Perils Covered Under Marine Insurance Policies

Shipping goods across seas or transporting valuable cargo carries inherent risks. To safeguard against potential losses, businesses and individuals often opt for marine insurance. This type of cover offers financial protection against unexpected events that may damage or destroy goods during transit. Among the popular options are A and B policies, which define coverage differently based on the types of perils insured. Additionally, for shipments that occur only once, single-transit insurance can be used to protect the cargo for a specific journey.

Understanding what perils are covered in these policies can help you make informed decisions when insuring your cargo.

What are different types of perils?

Perils in marine insurance refer to the specific risks or events that may lead to the loss or damage of goods during transit. Broadly, these perils are classified into two categories:

1.      All risk perils or comprehensive policy

An “All Risk” policy, also known as Institute Cargo Clause (A), offers the widest form of coverage. It includes almost all possible perils unless explicitly excluded in the policy wording. Typical perils covered under Clause A include:

• Accidental damage: Covers damage caused due to accidents during loading, unloading or transit.
• Fire or explosion: Protects against loss caused by accidental fire or explosion.
• Vessel or craft sinking or capsizing: Provides coverage if the transporting vessel overturns or sinks.
• Collision or contact: Covers loss if the ship collides with another vessel or any external object.
• Theft or pilferage: Protects against loss of goods due to theft or non-delivery.
• Natural calamities: Includes coverage for damage caused by storms, earthquakes or lightning.
• General average sacrifice: Covers contributions made to prevent a larger loss during maritime emergencies.

Note: This is an indicative list for information purposes only. The coverage may vary based on the insurer.

2. Named perils

Named perils, covered under the Institute Cargo Clause (B), provide protection only against specific risks explicitly mentioned in the policy.

Common perils covered under Clause B include:

• Fire or explosion: Damage due to fire outbreaks or explosions during transit.
• Overturning or derailment: Applicable for cargo transported via rail or road.
• Water damage: Losses due to rain, seawater or leakage affecting goods.
• Piracy or hijacking: Some policies list piracy as a covered peril, mainly for sea transport.

Note: This is an indicative list. Please read the policy wordings for the complete list of inclusions and exclusions.

Factors that affect which perils are covered in A or B marine insurance

The choice between Clause A or Clause B coverage depends on several practical considerations. Insurers and cargo owners evaluate various factors before deciding on the appropriate coverage. These include:

• Nature of goods: Perishable or fragile goods are usually insured under Clause A for broader protection, while durable goods may be covered under Clause B.
• Mode of transport: Marine, air or land routes have varying exposure to risks, influencing the type of coverage needed.
• Transit route and destination: Shipments passing through regions prone to piracy, storms or political instability may require comprehensive coverage.
• Value of cargo: High-value cargo typically warrants wider coverage.
• Duration of transit: Longer transits increase the likelihood of exposure to multiple perils, often making Clause A more suitable.

For shorter or single shipment journeys, single transit insurance can be purchased. This type of cover provides protection for a single journey from the point of origin to the destination, offering flexibility for businesses that don’t need continuous coverage.

Claim process for perils covered in A or B marine insurance policy

If goods are damaged or lost during transit, a claim can be filed under the applicable clause. The general process includes the following steps:

• Notify the insurer immediately: The policyholder must inform the insurer about the loss as soon as it occurs.
• Document the loss: Provide necessary details such as shipping documents, invoices and the marine insurance policy number.
• Survey and assessment: The insurer may appoint a marine surveyor to inspect and assess the extent of damage.
• Submission of claim form: A formal claim form, along with supporting documents (like bill of lading, survey report and photographs), needs to be submitted.
• Claim settlement: Once verified, the insurer processes and settles the claim as per the policy terms and conditions.

The claim process and documentation requirements may vary among insurers. Always review the policy wording to understand the exact procedure.

Conclusion

Understanding the perils covered under marine insurance is essential for anyone involved in shipping or logistics. The key difference between Institute Cargo Clause A and B lies in the breadth of coverage: Clause A provides “All Risk” protection, while Clause B covers specific, named perils. The right choice depends on the value of the goods, the nature of the cargo and the level of risk exposure.

For those seeking shipment-specific protection, single-transit insurance is a practical solution.

FAQs

• What is the difference between Clause A and Clause B in marine insurance?

Clause A offers all-risk coverage, protecting against most unforeseen perils unless specifically excluded. Clause B covers only named perils explicitly listed in the policy document.

• Does marine insurance cover damage due to natural disasters?

Yes, natural disasters such as storms or earthquakes are usually covered, depending on whether you have Clause A or Clause B coverage.

• Can I buy marine insurance for a single shipment?

You can opt for single-transit insurance, which provides coverage for one journey from the origin to the destination.

• Are theft and pilferage covered under marine insurance?

Theft and pilferage are generally covered under Clause A but may not be included under Clause B. Check your policy wording to confirm.

• How do I file a claim under marine insurance?

You must inform your insurer immediately after the loss, document the incident and submit the required claim form with supporting evidence. The insurer will guide you through the remaining process.

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.