Types of Marine Insurance

Parwinder Singh 6752

In one form or another, we all own insurance. Whether it's auto, medical, liability, disability or life, insurance serves as an excellent risk-management and wealth-preservation tool. Having the right kind of insurance is a critical component of any good financial plan. While most of us own insurance, many of us don't understand what it is or how it works.

Introduction

Marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby by agreed, against marine losses, i.e. the losses incident to marine adventure

Definition of Marine Insurance

HISTORY OF MARINEINSURANCE

Marine Insurance is not of recent origin. Its existence can be traced back to several centuries. Questions concerning it have naturally been coming up for a number of years and the law concerning it had taken a definite shape much prior to 1906 when the English Marine Insurance Act was passed with a view to codify that law.

Contrary to popular belief, Lloyds’ of London was not the first group of people to offer insurance for maritime commerce. The first form of marine insurance dates back to the year 3000 BC when Chinese merchants dispersed their shipments amongst several vessels so as to abridge the possibility of damage to the product(s).

Since independence Indian shipping had undergone a considerable expansion, and it became mandatory for an Indian legislation consistent with Indian conditions, for the smooth development of Indian marine insurance.

But, as in the case of its English counterpart, the Indian Act embodies only some and not all of the legal principles and rules of marine insurance, and its language is so extremely concise and general that its full import and meaning can scarcely be understood without referring to the existing law which it was intended to express or to the decided cases from which that law was evolved.

In India the law of marine insurance has been put in a statutory form since 1963.

Cont.….

Types of Marine Insurance

Hull Insurance

Cargo Insurance

Protection and indemnity Insurance

Hull Insurance

Hull and machinery insurance is to protect the ship owner’s investment in the ship. It is basically a property insurance which covers the ship itself, the machinery and equipment. Furthermore, the insurance covers some liabilities, normally collision liability with another ship and sometimes also liability for colliding with other objects than another ship.

Total loss of the ship Damage to the ship, engines and equipment Explosions and fire Groundings – damage to the ship, salvage of

the ship and possible contribution in general average

Collisions – damage sustained to the ship and sometimes also liability towards the other ship.

Striking other objects – damage inflicted to own ship and sometimes also liability towards the owners of the other object.

Claims include

Cargo insurance (also called marine cargo insurance) covers physical damage to, or loss of your goods while in transit by land, sea and air and offers considerable opportunities and cost advantages if managed correctly.

Cargo Insurance

Open Cover This is the most usual type of cargo insurance, where a

policy is drawn up to cover a number of consignments. The policy can be either for a specific value that requires renewal once the insured amount is exhausted or an permanently open policy that will be drawn up for an agreed period, allowing any number of shipments during this time.

Specific (Voyage) Policy Although not the norm for cargo insurance, you may from

time to time need to approach an insurance company (or broker, or other intermediary) to request an insurance policy for a particular consignment. This is usually referred to as Voyage Policy as the insurance covers only that specific shipment.

Types of cargo insurance

As an exporter you may often sell goods on terms where your customer (as the importer) is responsible for insuring (or at least bearing the risk of damage of or loss to) the goods, for example under FOB and CFR Incoterms 2000. In these cases you are exposed to the risk of damage to the goods while in transit and your customer refusing to accept them. In the worse case your customer may not have insured the goods.

Contingency insurance

THE ‘CARGO’ TRANSPORTED BY SEA IS SUBJECT TO MANIFOLD RISKS SUCH AS:

_LOSS OR DAMAGE AT THE PORT AND _ LOSS OR DAMAGE DURING THE VOYAGE. - MARINE CARGO INSURANCE’ PROVIDES THE

INSURANCE COVER IN RESPECT OF:LOSS OF OR DAMAGE TO CARGO

Claims include:

There are many different things that can potential happen during shipment of cargo and container on a ship. The loading cranes could damage the containers, theft and piracy, weather damage, as well as potentially losing the cargo overboard or other marine disasters. All of these possible issues are exactly why you need marine cargo insurance. Your goods need to be protected, and if you are a company transporting goods this way, then you need to protect your company from these potential issues of loss.

Why Should Cargo Be Insured?

Protection and Indemnity insurance, or “P&I” as it is usually called, is a ship owner's insurance cover for legal liabilities to third parties. “Third parties” are any person, apart from the ship-owner himself, who may have a legal or contractual claim against the ship. P&I insurance is usually arranged by entering the ship in a mutual insurance association, usually referred to as a “club”. Ship-owners are members of such clubs. Legal liability is decided in accordance with the laws of the country where an accident takes place. The P&I insurance cover for contractual liability is agreed at the time the owner requests insurance cover from the club and is usually in accordance with the owner’s responsibility under crew contracts or special terms relating to the trading pattern of the vessel.

Protection and indemnity

Other risks covered include liability for stowaways, liability for oil pollution and other types of pollution and legal liability for wreck removal if the ship sinks and is blocking free navigation for other vessels. In short, P&I insurance is a very comprehensive type of insurance cover which makes it easier for a ship owner or charterer to trade in international shipping transportation. P&I is as important to a prudent ship owner as his Hull and Machinery insurance cover.

Other P&I Covered Risks

P&I insurance also covers the owner’s liability for loss of crew belongings in cases of shipwreck or fire on board. The cover only applies to items which are deemed to be reasonable for any crew member to have with him on board. A crew member travelling with unusually expensive items, such as laptop computers, gold watches etc should make sure that he has such items separately insured.

Loss Of Crew Members’ Personal Effects