Difference Between Total Loss and Partial Loss in Marine Insurance

There are a variety of marine insurance plans that cover losses and damages to cargo. Thus, it has become easier for business owners who import and export goods. To claim the losses that have occurred, you can file a claim. But, before you file a marine insurance claim, it is essential to learn about the total amount that you can retrieve.

Here are the two types of marine losses:

Total losses in marine insurance: This is the case where the goods are almost completely or completely lost.

Partial losses in marine insurance: This is the situation when the insured cargo and goods have been partially damaged.

A total loss in marine insurance is the case where the cargo and goods are totally damaged or lost. The goods cannot be brought back to their original state under these marine losses.

There are two categories of total loss in marine insurance:

Actual total loss

Under this loss, the goods are completely lost or damaged beyond recognition. In case the policyholder does not get the goods, it is also considered a case of total actual loss.

For instance, if the cargo ship sinks or if it catches fire and the cargo gets destroyed completely, this would be considered a total actual loss. If the ship cannot be traced and the goods cannot be brought back, it will also become a case of actual total loss. Thus, the policyholder can claim the total claim amount of the goods that have been lost.

However, an important point to remember is that once the claim has been settled fully, the title of the cargo and the goods will be handed over to the insurer. In case they get any money from the sale of the goods that had been damaged, the insured will not receive any amount from the sale.

Constructive total loss in marine insurance

This is the case when the cargo or goods need to be abandoned because the cost of retrieving them is not at all viable. This can happen in many situations, such as if the cargo or goods have not been destroyed completely, but the cost of rebuilding or repairing them is not economically practical. This is common when the ship is damaged, as the cost of repair is more than the actual value of that ship.

For instance, if the cargo is not damaged, the expenses for retrieving it are not viable. So, in these cases, the insured surrenders his interest to the insurer and provides them with an abandonment notice. They can file a claim for total losses. This is the constructive total loss in marine insurance.

A partial loss in marine insurance is the case where the cargo and goods are not completely damaged or become useless.

There are two categories of partial loss in marine insurance:

Particular average loss

This is the loss that is incurred because of perils or involuntary events. To claim the losses, the reason for the damage must be listed in the inclusions of the marine insurance policy. For instance, if the damage occurred because of extreme flooding, then the insured will be provided compensation only if the peril is covered under the marine insurance policy.

General average loss

This is a type of loss that is incurred voluntarily to avoid grave danger. General average loss contains a sacrifice that is done for the preservation of common interest. This type of loss is generally made to happen so as to ensure safety from an approaching peril.

For instance, if a ship starts sinking due to an overload, some of the cargo and goods might have to be thrown out to avoid sinking. However, several aspects need to be taken into account in such cases:

If the peril was actually there and not in fearful imagination.

If the loss was made to happen voluntarily or deliberately.

Once the loss category has been established, the insured can file a claim against the losses and get compensated.

Marine insurance is an important aspect to take care of for import-export business owners. While filing a claim, it is essential to quantify the incurred losses. For that, you need to understand the difference between total loss vs partial loss in marine insurance. Thus, understand all the details properly, ensure you know the category of losses, and file a marine insurance claim accordingly.

Cargo insurance is also available online on Tata AIG’s website. The features include prompt claim settlement, peace of mind due to efficient risk management during accidents and natural disasters, and more.

In the case of general average loss, marine insurance in India necessitates that you provide evidence for the reason that caused the losses so that your claim is not rejected.