Insurance is a broad term and its simple and exact definition is protection against unpleasant damages or losses. Marine insurance is also one of its types. Generally, there are different types of marine insurance. The main role of marine insurance is to cover the damages and losses of ships, depots, cargo, floating instruments, shipyards, seaward facilities, marinas, and terminals. Marine insurance also protects any type of transportation through which several different properties are transferred from their beginning point to their final location. Read this article thoroughly to get a complete guide on basic types of marine insurance and its policies.
According to Insurance Information Institute, People often bother with two terms “inland marine” and “marine insurance” but they should not confuse both terms because inland marine insurance protects the transportation of materials, products, and types of equipment over land using train, truck, and any other third parties.
Meanwhile, marine insurance protects the transportation of products over water using ships, boats, barges, and sailboats.
Read more: How Do Insurance Agents Get Paid
Basic Types Of Marine Insurance
Marine insurance, according to Marine Insurance Act 1906, is a contract between an insurance company and a policyholder in which the insurance company is responsible to secure assurance against accidental damages and losses, the marine insurance may manage potential risks of inland waters that may happen unfortunately.
All the losses that are caused by any modes of transportation including cargo vessels, ships, terminals, and boats are covered under marine insurance.
What is meant by the term marine insurance?
Marine insurance is a type of insurance that is typically aimed to offer coverage to manage risks of goods transportation by way of oceans and seas along with indemnity loss of floating types of equipment.
Generally, marine insurance has two branches; inland marine and ocean marine. Inland marine insurance reimburses the loss of goods transportation on land, whereas ocean marine insurance indemnifies damages of goods transportation on water.
Marine insurance facilitates policyholders with the coverage of their boats, barge, vessels, megayachts, and watercraft damages. Marine insurance also provides coverage for salvage and wreck removals without any extra charges.
Marine insurance also covers other means of transportation that are involved in transferring, acquiring, and holding goods.
Marine insurance has different plans and each plan has its specific characteristics, therefore you should select the plan according to your requirements.
Getting a marine insurance plan isn’t simple like other plans such as homeowner insurance, life insurance, and car insurance.
What is the main purpose of marine insurance?
The main purpose of marine insurance is to provide coverage to manage incidental risks. Because it is an agreement between two parties whereby one party guarantees to compensate the loss of another party during the marine adventure.
Insurers have to reduce the spreading of danger by providing premiums at the exact time. This will make the policyholders put back their losses into an earlier financial state.
The premiums just cover the loss of policyholders, they can’t get any type of advantage from the amounts of premiums. Marine insurance also provides potential protection against uncertain financial loss.
Typically its main function is to remove the uncertainty of potential damages. Individuals and businesses who own marine insurance policies, don’t need to worry about savings to expand their business for the future.
Because if any unforeseen incident happens to their business, their marine insurance policy will cover that incident.
What are the main types of marine insurance?
Marine insurance is typically classified into three main types; Hull, Liability, Machinery, Cargo, Freight and Protection, and Indemnity insurance.
All these types of marine insurance cover different damages or losses according to their customer’s requirements.
Each insurance company offers coverage to their clients depending on their financial loss, because each client has a different financial loss. Let’s discuss these types of marine insurance in detail.
Hull insurance provides coverage against damage to a vessel of transportation and also covers the loss of the torso and hull of ships or vessels which are involved in transportation. As there are various types of vessels, the types of hull insurance policies also vary.
For example yachts, megayachts, barges, fishing vessels, and commercial vessels have their specific hull insurance policies. The owners of ships and vessels are mostly willing to buy the hull insurance policy.
Because hull insurance policy insured their clients cover the loss of their vehicle during marine voyages. Hull insurance policies are considered valued policies because the worth of the insured vehicle is mentioned in the policy.
With the help of that worth the insurer can determine the amount of premium, that they have to pay their clients at the time of their vehicle damages.
It is a type of marine insurance that provides coverage for crashed and collide ships. For example, if any crash or collision happens to a ship, the insurer of the ship will compensate the loss.
The machinery insurance policy covers the physical damage or loss of vehicles. If the machinery parts of vehicles break down during unfortunate happenings, the machinery insurance will indemnify the loss of that parts. For example workshop machinery, drills, compressors, industrial slats, and factory manufacturing machinery.
Cargo insurance is a type of marine insurance that reimburse the loss of goods during transportation via sea, air, and land.
For instance, if a person has to buy cargo insurance and a sudden loss occurs to his belongings during shipment, his insurer or insurance company will be responsible to cover that loss.
Freight is the amount that the owner of the ship has to pay to the insurer so that their goods can be transported from their origin to the final location.
The owner of the ship has two options to pay the freight; either before the transportation of goods or after the transportation of goods.
Freight insurance protects traders’ ships. But freight insurance also has a disadvantage for the ship owners in the form of money lost.
Protection and Indemnity insurance
This type of marine insurance provides coverage against personal injuries, death claims, and infirmity. For example, if any mishappening occurs to the policyholder due to voyagers, squads, and similar things, protection and indemnity insurance will protect the policyholder and cover all the loss. If the collision of ships occurs accidentally, protection and indemnity insurance will also cover it.
What are the types of marine insurance policies?
Several different types of marine insurance policies help the owner of ships or boats to manage different types of risks. Insurance companies permit the ship owners to choose the policy which matches their requirements. There are ten different kinds of marine insurance policies which are as follows;
The valued policy discussed the exact value of cargo in advance. So that if the cargo is damaged due to any reason, the policy can be reimbursed at the exact coverage level according to the policy plan.
Unvalued Or Open Policy
Unvalued or open policy work oppositely to the valued policy because under this policy the exact value of the cargo isn’t mentioned in advance. The value of the cargo is determined later, therefore the policy is named unvalued or open.
People don’t buy this policy because it is mostly used in freight insurance. The values which are covered under this policy are included expenses of incidents, investment costs, values of insured properties, and all types of other expenses related to incidents.
Time policy is an unchangeable policy because this is published for a set period. The specific time of this policy is almost one year but sometimes this policy has a shorter time than one year. Hull insurance is covered under this policy because the ship or boat is insured for a specific time.
Voyage policy specifically covers the loss of voyage. If any damage or loss occurs while the voyage, this policy will provide coverage. This type of marine insurance is beneficial for cargo because insurance companies indemnify the loss of voyage also shipping and landing of goods.
The mixed policy is the combined form of voyage and time policy. A mixed insurance policy is typically suitable for ship insurance.
A wage policy is a type of marine insurance policy that is not implemented by law. This policy doesn’t mention the value of the insured property beforehand.
The insured person also doesn’t need to pay interest under this policy. This policy is something like gambling or betting.
Port Risk Policy
Port risk policy protects the ship until the ship left the port. Some ships anchored in the pots for a longer time. Therefore, the owner of the ship buys this type of policy to protect their vessel or ship from accidental loss.
The traders who use cargo daily generally take a floating policy. This policy is also known as the declaration policy because it requires more formalities and time.
For example, if a person needs to regularly transport different kinds of goods, he will need to buy a floating policy. This policy covers the loss or damages of lump sum goods without discussing their values in advance.
Block policy covers both types of loss marine route loss as well as land route loss. This policy provides coverage in the form of blocks. Landlocked countries mostly use this policy.
Named policy is the most popular type of marine insurance. The basic requirements to buy this policy are the exact price of the cargo and the name of the ship.
What are the 5 principles of marine insurance?
There are five basic principles of marine insurance. Marine insurance is spreading widely nowadays because of the expansion of trading. Now it is not only considered just a type of insurance because it has been in the market for years.
The first and foremost principle of marine insurance is its highest and superior faith. This means insurance policies have fine clarification of documents.
The second principle of marine insurance is policyholders’ insurable interests. This means marine insurance policy makes sure the safe transportation of goods.
The third principle of marine insurance is indemnity of an unforeseen loss. This means policyholders can’t get any advantage from the policy rather than compensation for their actual damage.
The fourth principle of marine insurance is cause proxima. It means policyholders of marine insurance can find the proximate cause which leads them to find out the actual cause of damage.
The fifth principle of marine insurance is to minimize loss. According to this principle, the policyholders shouldn’t be reckless about the policy. Rather than they should try to cut back on the damage.
Conclusion: Importance Of Marine Insurance
Marine insurance is considered as important because it provides comprehensive coverage against several different perils such as vandalism, theft, explosion, fire, earthquakes, sinking of ships, and several other expenditures. Marine insurance make sure the safe and sound transportation of goods from their origin to their final position. Marine insurance makes the shipments easy for the ship owners.