What are Features and Characteristics of Marine Insurance?

A marine insurance policy can be considered a specialised form of insurance that secures from loss or damage to freight as they are transported from origin to destination. Although this is not commonly known, marine insurance covers various modes of transportation including sea, air, rail, and road.

This policy is governed by India’s Marine Insurance Act of 1963, which mandates insurance providers to bear the cost of damages to insured goods in case of unforeseen events. Typically, the characteristics of marine insurance contracts include financially securing goods against threats such as theft, fire, unforeseeable accidents and even mishandling during loading and unloading.

A marine insurance policy is designed to meet specific business needs, whether they are exporters, importers or logistics providers. It provides comprehensive coverage for perishable goods, ensuring that all stakeholders right from exporters and importers to forwarding agents can mitigate financial risks during transit.

The features of marine insurance policy are extensive, offering coverage for freight and onshore/offshore assets such as terminals, ports and pipelines. With flexible options available, insurance seekers can protect their businesses from a wide range of scenarios ensuring smooth operations even in the face of transit mishaps.

Marine insurance is designed to offer comprehensive coverage and comes with flexible features to secure goods during transit across various transportation modes. Here are some key features of marine insurance**

-Comprehensive Coverage Marine insurance is designed to offer protection against physical loss or damage to goods during transit and from risks such as theft, fire, accidents and natural disasters.

-Multi-Modal Applicability The policy is applicable against a host of transportation modes, including sea, air, road, rail and combined methods, ensuring flexibility for businesses.

-Customisable Policies Businesses have the option of customising policies to meet specific requirements such as cargo type, transport routes and risk tolerance.

-Global Reach With marine insurance, the freight receives global coverage, protecting shipments from origin to final destination.

-Policy Options Businesses can opt for “all-risk” policies that secure freight against all risks aside from the exclusions or, they could invest in “named perils” policies, which protect against specific listed risks.

-Valuation Flexibility These policies come with several valuation ways such as invoice value, market value or cost-plus freight, to determine the worth of the freight.

-Open vs. Specific Policies Open policies offer ongoing coverage for several shipments over time, whereas specific policies take care of single or defined shipments.

-General Average Clause Includes provisions for shared losses at the time of emergencies, such as jettisoning cargo to save a vessel.

-Subrogation Rights Insurers can recover losses from third parties responsible for damages, thereby reducing financial strain on policyholders.

-Deductibles and Excess Policies may comprise deductibles (which is the insured’s portion of a loss) as well as excess limits, which influence premium costs.

-Claims Management Insurers provide clear procedures for quick and accurate filing of claims, thereby ensuring efficient loss resolution for businesses.

Marine insurance comes with several policy options designed for specific needs. Here are the key types of policies and the features of marine insurance they provide:**

-Import Insurance: Secures goods transported into the policyholder’s country from international locations. Coverage includes risks such as transit damage, theft and non-delivery, emphasising key elements of marine insurance.

-Export Insurance: Protects goods transported from the insurance holder’s country to overseas destinations. This policy also takes care of risks similar to those in import insurance, ensuring the features of marine insurance policy are applicable worldwide.

-Inland Marine Insurance: Curated for domestic transit, this policy secures goods transported via land, air or waterways within the country. It secures against unforeseeable events such as accidents, theft and natural disasters.

-Marine Cargo Insurance: This policy is designed to protect goods transported by sea, and includes coverage for theft, piracy, natural disasters and damage during loading or unloading.

-Hull Insurance: Secures the vessel itself, including machinery and equipment, against risks such as collisions, fires and accidents.

-Freight Insurance: Compensates for lost freight charges if goods are damaged or not delivered during transit, benefiting shippers and carriers alike.

Marine insurance transfers the liability of goods in transit from the parties that are involved, to the insurance provider, thereby securing them against financial threats arising from potential damage. Exporters frequently rely on marine insurance to protect their goods from risks such as spoilage or theft, highlighting the critical characteristics of marine insurance contracts.

During transit, compensation for damages may be based on a “per package” or “per consignment” basis. This coverage, however, may not entirely cover the value of the goods, thereby requiring exporters to look for additional protection.

In addition to financial protection, marine insurance helps exporters adhere to contract obligations under terms such as CIF (Cost, Insurance and Freight) or CIP (Carriage and Insurance Paid). These agreements need exporters to insure goods to protect the interest of the buyer and the bank. While DDP (Delivered Duty Paid) and DDU (Delivered Duty Unpaid) terms do not mandate insurance, sellers often opt for it as a precaution.

Before investing in a marine insurance policy, insurance seekers must go through the policy inclusions and exclusions to understand the scope of coverage and ensure appropriate coverage. The key inclusions and exclusions are as follows:

By knowing how a marine insurance policy secures goods during transit and the limitations to help businesses understand the characteristics of marine insurance contracts individuals can make informed investment decisions.

Here are the steps that the policyholder must take to experience a seamless claim settlement process:

• Ensure all accidents are reported promptly. If any packages are missing, immediately notify the carriers, port authorities or bailees.

• Do not accept damaged goods without obtaining written confirmation for the same.

• At the time of delivery, carefully inspect the seals and the containers. Make a note of broken or missing seals on the delivery form and retain them as evidence.

• For any visible loss or damage, request an inspection by the shipping company and raise a claim.

• Any hidden damage or loss must be reported to the shipping company in writing within three days of receipt.

• Familiarise yourself with the regulations at the delivery port to avoid delays.

Marine insurance plays a critical role in protecting goods against the unforeseeable risks of transportation. By providing comprehensive protection through customisable policies, it ensures that businesses can avoid financial losses regardless of whether they operate locally or internationally. The features of marine insurance offer tailored solutions for various transportation modes promising security against concerns such as theft, damage or natural disasters.

In addition, transit insurance is an important subset of marine insurance, focusing on protecting goods across air, sea, rail, or road travel. With a reliable insurer, businesses can safeguard their assets, comply with legal obligations, and ensure seamless trade operations.

TATA AIG offers a robust marine insurance policy, helping businesses access flexible and customisable coverages.

Whether it is exporters, importers, or freight carriers, our marine insurance affords peace of mind, so enterprises can focus on growth while ensuring their freight remains protected throughout its journey.

-What are the “perils of the sea” in marine insurance?

In marine insurance, “perils of the sea” refer to risks unique to marine transport, such as storms, sinking, and piracy. However, definitions may vary based on the policy and jurisdiction.

-How to determine the coverage amount for marine cargo insurance?

To ensure appropriate coverage, the insurance coverage must equal the total value of goods, including freight and incidental costs.

-Is marine cargo insurance mandatory?

Marine Cargo Insurance is both mandatory and highly recommended as it secures ship and cargo owners against transit losses or damages, ensuring financial security and peace of mind.