Marine insurance is such insurance which provides compensation of losses

on the Hull, Cargo, Passenger and third party liabilities due to marine risks.

There is a definite categorization of various types of marine insurance and

different types of marine insurance policies according to the needs,

requirements and specifications of the transporter.

Here we have given seven reasons of buying marine insurance before your next journey=

1. Cargo theft is rising= There has been a rise in cargo theft, especially

through identity theft and fictitious pickups. For instance, cargo theft is one of

the main criminal activities in Canada which is costing an economy a loss of

billion a year. Then there are pirates’ thefts which are also one of the major

risks of cargo theft and loss in international shipping. Like it is shown in the

film Captain Phillips, pirate attacks are alive! If you have marine insurance,

the insurer may compensate you for any loss or damage that may arise due

to cargo theft. Most of the marine insurance companies offer add-on covers to

include losses or damages that may arise due to strike, riot and commotion.

2. Containers lost at sea= Every year, more and more containers are lost at

sea. As per the World Shipping Council surveys in 2011, 2012 and 2013

estimates, there were nearly 733 containers lost at sea on an average.

Considering the dramatic rise in the number of shipping containers lost at

sea, it is necessary to go with marine insurance before you start your next

journey.

3. Natural events occur= Natural disasters are beyond one’s control and

therefore, they can strike anytime and cause you a multi-billion-dollar loss.
 Such incidents hamper the financial health of a company who has no marine

insurance policy.

4. Cargo damages happen= Even if your ship is equipped with all the safety

measures, cargo damage happens due to various reasons like the wrong

selection of container, poor condition of the container, overloading,

inadequate ventilation, ineffective sealing arrangements, overloading, etc.

Though, there are various reasons which can damage your cargo, you would

have to incur financial losses if you have no marine insurance policy.

5. Legal requirement= In most of the situations, shippers’ sale contract also

obligated to purchase a marine insurance policy to protect the interests of

buyers. In case you fail to purchase a marine insurance policy, you will not

only have to incur financial losses in case there is a loss or damage, non-

compliance with the terms and conditions means you will also lose your

buyer’s trust.

6. Carriers do not give complete coverage= By law, carriers can’t be held

responsible for all losses or damages like natural calamities, low average,

etc. It means, in those situations where carriers are responsible, there will be

a restriction on the liability. Due to this reason, it is imperative that shippers

should never depend on the carrier which is shipping their goods or services

in case any loss or damage arises and purchase a separate marine insurance

policy.

7. Better control over the policy terms= If shippers leave the marine cargo

insurance on the whims of the other party when importing or exporting goods,

they are exposing themselves to the risk of underinsurance. Above this, if a

 claim arises that involves dealing with a foreign insurance company, perhaps

in a foreign language, it can be both time consuming and frustrating. So, it is

good to buy a marine insurance policy on your own.

Different types of Marine Insurance are as follows:

a) Hull Insurance:

Hull insurance is the insurance against loss caused by damage or destruction

of waterborne craft or aircraft to the owner. It is the insurance of the ship

which includes all the articles and pieces of furniture in the ship. Hull and

machinery insurance are done to protect the ship owner and investment in the

ship. It is a property insurance which covers the ship itself, the machinery and

equipment. If the ship is damaged, the owner of the ship gets indemnity from

the insurance company. This type of marine insurance is usually taken out by

the owner of the ship in order to avoid any loss of the ship in case of any

mishaps occurring.

b) Cargo Insurance:

The goods sent through the waterway are known as cargo. Cargo insurance is

also called marine cargo insurance. It covers physical damage or loss of your
goods while in transit by land,sea, and air. It also offers considerable

opportunities and cost advantages if managed correctly. It is insured by the

owner and insurance of goods shipped through waterways is known as cargo

insurance. If the cargo is ruined, the owner gets the indemnity from the

insurance company.

c) Marine Liability Insurance:

Liability insurance is that type of marine insurance where compensation is

bought to provide any liability occurring on account of a ship crashing or

colliding. In the course of the marine adventure, one ship may collide with

another ship. The goods of another ship may lose. Marine insurance provides

the compensation of such liabilities nowadays if insurance has made

insurance of such liabilities. A crew member traveling with expensive items,

such as laptop computers, gold watches etc. should make sure that he has

such items separately insured.

d) Freight Insurance:

To transfer the goods from one port to another, the amount paid to the owner

of the ship is called freight. The payment of such freight can be made in two

ways: either in advance or after the ship reaches its destination safely. Freight

insurance offers and provides protection to merchant vessels’ corporations. It

stands for the chance of losing money in the form of freight, in case the cargo
is lost due to the ship meeting in an accident. This type of marine insurance

solves the problem of companies losing money because of a few

unprecedented events and accidents occurring.

Different types of Marine Insurance Policies are listed

below:

1. Voyage Policy:
This policy gives more importance to the voyage. A voyage policy is that kind

of marine insurance policy which is valid for a particular voyage. It covers the

risk from the port of departure up to the port of destination. This type of policy

is considered more useful for cargo. The insurance company should give

indemnity for loss/ damage of any property of the insured during the period of

the voyage. The liability of the insurer continues during landing and re-

shipping of the goods. The policy ends when the ship reaches the port of

arrival. This type of policy is purchased generally for cargo. Under this policy

"from" and " to" has a great importance.

2. Time Policy:

The policy which is issued for a fixed period of time is known as time policy. A

marine insurance policy is valid for a specified time period generally valid for a
year. All the marine perils during that period are insured. This type of policy is

suitable for full insurance. The policy is generally taken for one year although

it may be for less than one year. But there is no restriction to make this type of

policy for less than one year. This policy is more commonly used for hull

insurance than for cargo insurance. The ship is insured for a fixed period

irrespective of voyages. The policy is generally issued for one year. For

example, a period of time from 12 march 2015 to 11th December 2015. This

policy is effective for this period.

3. Mixed Policy:

The joint form of voyage policy and time policy is called mixed policy. In this

policy, the elements of voyage policy and of time policy are combined . The

reference is made after a certain period after completion of the voyage. The

meaning of the mixed policy is that a new policy takes birth from the

combination of the fundamental things of time and the place policy. Generally,

this policy is used for ship insurance.For example, mixed policy is the policy

which states the ship should reach from 1st December 2015, from Paris to

October 2015 in New york. Policy expires whichever is met first.

4. Open or Unvalued Policy:

In this type of marine insurance policy, the value of the cargo and

consignment is not put down in the policy beforehand. The value thus left to
be decided later on is called the unvalued or open policy. The insurable value

of the policy includes the price of the insured's property, investment price,

incidental expenditure and all the expenditure as well.The unvalued policy is

not used in practice so much. This policy is used only in freight insurance.

5. Valued Policy

The opposite of an open marine insurance policy is a valued policy. In this

type of policy, the value of the cargo and consignment is ascertained and

mentioned in the policy document beforehand, thus, making clear about the

value of the reimbursements in case of any loss to the cargo and

consignment. Under this policy, the value of the policy is decided at the time

of contract. Generally, the insured amount in this type of policy includes the

price of cargo, ship, freight and approximate profit. Thus the value which is

mentioned in the policy is the insured amount.

6. Port Risk Policy:

The Port Risk Policy is taken out in order to ensure the safety of the ship while

it is stationed in a port. It covers the risks when a ship is anchored in a port. It

is an ocean marine insurance designed to protect a vessel that is portside for

a long period of time. Coverage terminates as soon as the vessel leaves port.

7. Wage Policy:
A wage policy is one where there are no fixed terms of reimbursements

mentioned. This is a policy held by a person who does not have any insurable

interest in the insured subject.He simply bets or gambles with the underwriter.

The policy is not enforced by law.

8. Floating Policy:

The floating policy is also called declaration policy. This policy is useful for the

merchant who delivers cargo regularly. When a person ships goods regularly

in a particular geographical area, he will have to purchase a marine policy

every time. It involves a lot of time and formalities. He purchases a policy for a

lump sum amount without mentioning the value of goods and name of the ship

etc. It is the agreement between the insurer and insured that the insured

declares a number of goods on the basis of shipment documents.

9. Named Policy

The policy which is issued by mentioning the name of the ship and price of the

cargo is called named policy. This type of policy has been receiving popularity

in marine insurance.

10. Block Policy

It is the policy which takes the risk in the block that is from sea route and land

route. It not only protects from the risk of the marine route but also covers the
risk occurring on the land too. It takes the risk of transportation from the place

of the seller to the place of the buyer. It is a very useful policy to the

landlocked countries.

Procedure and Documentation for

Filing Claim of Marine Insurance.
Notice to Insurer 
Intimating insurance companies about the loss or damage of goods is the
first step to be taken by the insured under claim of Marine Insurance. In the
event of loss or damage to the goods, the insured or his agent has to give
immediate notice to the insurance company.
Reasonable Care
In marine Insurance, it is a condition of the policy that the insured and his
agents should act as if the goods are uninsured and should take all such
measures and actions as may be reasonable and necessary to minimize the
loss or damage. They must also ensure that all the rights against carriers,
baileys or third parties are protected. So Reasonable care is one of the
measures to be taken into consideration under the procedures of claiming
Marine Insurance against loss or damage of export import goods of
international trade.
Survey and Claim
Survey and claim is the next step to be followed under procedures and
formalities to claim Marine Insurance under export and import goods. In a
Marine Insurance, at the time of taking delivery, if any package shows signs
of outward damage, insured or his agents must call for a detailed survey by
the ship surveyors and lodge the monetary claim with the shipping company
for the loss or damage to the packages. A certified marine surveyor can be
appointed at the location where damaged cargo is available.
Outward Condition
When the outward condition of the packages is apparent, the insured takes
delivery unsuspectingly. After reaching the warehouse, one opening the
packages, they find damages to goods. In such an event, the insured and or
agent should immediately inform the insurance company and call for the ship
surveyor for detailed survey. They should not make any delivery of goods.
They should not disturb the packing materials or the contents in packages.
This is important in claiming Marine Insurance under export and import trade.
Missing Packages
In case any package is found missing, the insured must lodge the monetary
claim with the insurance company and its baileys (shipping company) and
obtain a proper acknowledgement from them. This is one of the formalities to
claim Insurance under import export of international trade.
Time Limit
In a Marine Insurance, the time limit for filing suit against the shipping
companies is one year from the date of discharge of goods, which may
change as per the rules and regulations of the insurer.
Documents Required
The following documents are to be submitted by the insured to enable the
insurance company to settle the claims expeditiously :
1. Original insurance Policy or Certificate.
2. Copy of Billing Lading.
3. Survey report / Missing certificate.
4. Original Invoice and Packing List together with shipping specification or
weight notes.
5. Copies of Correspondence exchanged with the carriers or bailees.
6. Claim Bill.
Precautions (Do’s & Don’t)
While procuring insurance, exporter should observe the following precautions
in claiming Insurance under export import goods:
(i) Amount of insurance is 110% of the C.I.F value of goods. 10% covers
anticipated profits. In other words, exporters are allowed to take a policy to
cover profits up to a maximum amount of 10% of CIF value.
(ii) Insurance documents are not later than the date of shipment.
(iii) Amount insured must be in the same currency invoice to take care of the
exchange fluctuations.
(iv) Insurance document is issued by the insurance company or its agents or
underwriters. The document issued by the brokers is not a good document.

2 Types of Marine Losses: Total

Loss and Partial Loss

A. Total Loss:
Total loss is divided into two categories:

1. Actual Total Loss:

Actual total loss occurs under these following situations:

(a) The subject-matter is completely destroyed.

(b) The goods are so damaged that they cease to be a thing of the kind
which were insured.

(c) The insured is deprived of the subject-matter.

When a ship is sunk or is completely destroyed by fire, it will be a case

of actual total loss. There may be a case when the goods are so
damaged that they do not look like goods which were insured e.g. if
crockery is reduced to pieces, it is a case of actual total loss.

In another case if the insured is not able to get the things back i.e., if
the ship is missing and there is no trace of it, it is also a case of actual
total loss. In case of actual total loss the insured is entitled to recover
the full amount of loss. When the insured has been compensated the
title of goods passes on to the insurer. If some amount is received from
the sale of damaged goods, the amount will go to the insurer and not
to the insured.

2. Constructive Total Loss:

This occurs when the ship is abandoned for certain reasons. It is not
commercially viable to retrieve the ship or cargo. The ship or the cargo
is not wholly destroyed but it is not practicable to get it repaired and
restore it to its original position. When a ship is badly damaged, and
the cost of repairs is expected to be more than the value of the ship, it
will be advisable to abandon the ship.

In the same way if the cargo is safe in the abandoned ship but the cost
of bringing the cargo to the coast is more than the cost of cargo, then it
will be proper to leave the cargo. In the case of constructive total loss,
the insured gives a notice of abandonment and surrenders its interest
in the subject-matter to the insurer. The insured can claim damage for
total loss.

B. Partial Loss:
When the subject-matter is partially damaged, it will be a
case of partial loss. It is of two types:

1. Particular Average Loss:

A particular average loss has been defined as, “a partial loss of subject-
matter insured, caused by a peril insured against, and which is not
general average loss.” A particular average loss is not caused
voluntarily. The insured subject-matter should be damaged and this
damage should be caused by marine peril which is insured.

2. General Average Loss:

A general average loss is caused voluntarily to avoid an impending

danger. “A general average loss is one which is caused by an
extraordinary sacrifice or expenditure voluntarily and reasonably
made or incurred under fortuitous circumstances, for the sole purpose
of preserving the common interest from an impending peril.”
If a ship is sinking because of overload, some of the cargo may be
thrown out of the ship with a purpose to save the ship and the crew. It
will be a case of general average loss.

Some conditions are to be satisfied before deciding about a

general average loss:
(a) There must be an extraordinary situation.

(b) The peril must be real and not imaginary.

(c) The loss must be voluntary and deliberate.

(d) The sacrifice must be made prudently.

(e) The purpose should be to save the whole adventure.

(f) The act should be successful at least partially.

Role of Clearing and

Forwarding Agents:
Export-import procedures are very complex and time-consuming. Therefore,
every exporter should avail the services of Clearing and Forwarding (C&F)
agents who are expert and well versed with the customs and shipment
procedures. For smooth and timely shipment of goods, the exporter must
appoint a competent C&F agent who is able to, inter alia, provide the
following services:
 
Essential Services:
(a) Transportation of goods to docks and arrangement of warehousing at
port.
(b) Warehousing facilities before the goods are transported to docks.
(c) Booking of shipping space or air freighting and advice on the relative cost
of sending goods by sea and air.
(d) Arrangement for loading of goods on board.
(e) Equipped with information on shipping lines and freight to different
destinations, and various charges payable by exporters.
(f) Obtaining marine insurance policies.
(g) Preparation and processing of shipping documents, Bills of Lading, Dock
Receipt, Export Declarations, Consular Invoice, Certificate of Origin, etc.
(h) Forwarding of banking collection papers.
 
Desirable Services:
(a) Storage facilities abroad, at least in major international markets, to
warehouse the goods in case the importer refuses to take delivery on any
account.
(b) Can trace the goods, if shipment goes astray, through his international
connections.
(c) Arrangement for assessing the damage to shipment enroute.