When it comes to shipping perishable goods across international waters, unpredictable situations can disrupt your export journey. Inclement weather, theft, pilferage, robbery, loss, spoilage, or misplacement of the shipment can incur severe repercussions for the export business.
The marine industry is involved with the logistical responsibilities to ship and safeguard your perishable cargo safely from end-to-end port. Marine insurance, also referred to as cargo insurance, plays an integral role for the various shipping industries and ship or cargo owners.
In this blog, you will get to know about the importance of marine insurance, benefits of marine insurance, and marine insurance definition.
What is Marine Insurance?
Marine Insurance Meaning: It can be referred to as a compensation contract. The perishable goods that are being dispatched from the origin of the country to the desired port of destination are insured. In the event of any accidents or hazardous situations, the cargo handles everything from the ship's departure to its arrival. Besides the sea route, marine reimburses losses for other modes of transport, such as land, air, and railways.
What is the importance of marine insurance?
When it comes to the stages of the import and export process, marine insurance is the essence. The exporters as well as the exports are subject to the payment of the perishable goods under insurance. There are a number of good reasons to avail marine insurance before shipping your perishable goods, as marine insurance provides a lot more than just contractual requirements.
During the transit, one of the three parties can insure the goods:
- The forwarding agent
- The Exporter
- The Importer
Where can maritime insurance be found?
Opting for marine insurance in India is quite easy. There are various banks and financial organizations in the country where marine insurance is allotted to carry out the shipment process.
Marine Insurance Act 1963
In India, the Marine Insurance Act came into effect in 1963. Under Section 3, it states that whenever marine insurance is mentioned, regarding goods coverage against loss or any damage, the insurer needs to bear the cost. The insurer is responsible for maintaining the condition of the goods in case of any misfortune incidents.
What are the principles of marine insurance?
The principles of marine insurance are as follows:
Principles of Good Faith: The marine insurance policy depends on complete trust between both parties, the insurer and the insured.
Principle of Proximate Cause: The proximate cause is not the most recent event and is not efficient, but it is still the main and sufficient reason for the loss.
Principle of Insurable Cause: Any item referred to as a marine risk and the guarantee for the goods insurance should both maintain relevance from a legal point of view. Furthermore, a set of rules known as " incoterms " is applied to formally assign each party's share of the goods’s insurance.
Principles of Indemnity : The insurance parties will only bear the amount of the loss. The parties are not liable to gain any profit from the purchase of insurance. If they do, they won't get more than the actual loss.
Principle of Contribution: The coverage of perishable goods is insured by more than one insurer. In such cases, the cost must be distributed equally among the insurers.
Features of marine insurance are as follows
- Acceptance of the Offer
- Payment of the Premium
- Contract of Indemnity
- Insurable Interest
- Contribution
- Period of Marine Insurance
- Deliberate Act
- Claims
- Flexibility
How does Marine Insurance work?
Marine insurance shifts the liability for the perishable goods to the insurance company. The intermediates that manage the perishable commodities have minimal legal liability in the first place. The exporter can benefit from maritime insurance coverage to safeguard the perishable goods against any risks of spoilage or harm.
During the transit, the shipping company may cover damages and losses of the perishable goods based on a 'per package' or 'per consignment' basis. The exporters prefer taking the help of a reliable insurance company before shipping the goods from one port to another.
The marine insurance policy should adhere to the export contract obligations. The exporters need to opt for marine insurance coverage and oblige the contractual obligation to align with agreements such as CIF (cost, insurance, and freight) or CIP (carry and insurance paid) to protect the buyer’s or their bank’s interests. In terms of delivered duty unpaid and delivered duty paid, sellers are not required to insure the goods, but they generally are.
Follow these practices to get marine insurance and avoid insurance claims.
- You should do the packaging of the perishable goods to ensure safety while loading and unloading.
- Packing should be sealed properly to resist mother nature hazards in international waters.
- Avoid clumsiness while packing the perishable goods, as there are possible risks of theft and pilferage.
The different types of marine insurance are as follows
- Freight Insurance: During the transit, the freight insurance policy covers the damage or losses incurred by the shipping companies or ship owners.
- Liability Insurance: Marine liability insurance is responsible for compensating for liabilities due to ship collisions or crashes.
- Hull Insurance: Hull insurance covers the transport vehicle's body and hull from damage and mishaps.
- Marine cargo insurance: The marine cargo policy covers the insurance of the perishable goods exported from the port of origin to the port of destination.
What are the types of marine insurance policies?
- Floating policy: The Floating in Marine Insurance policy, also known as the blanket policy, is applicable for large exporters to go for an open policy rather than taking insurance separately for each shipment. An open policy is a type of insurance coverage that insures all shipments made during an agreed-upon period, typically a year. The exporter must declare details such as the goods shipped, modes of transport, and destinations on a routine basis.
- Voyage policy: This specific policy applies to a single lot or consignment only. The exporter needs to obtain insurance coverage separately each time the shipment is transported overseas. But this process takes effort and time for every single consignment. On the other hand, an open policy ensures shipments easily.
- Time policy: In terms of time policy, marine insurance is limited for a year’s period. It can be extended for more than a year to complete a specific voyage. Generally, it is fixed for the agreed time period. Under the Marine Insurance Act in India, a time policy can be issued only once a year.
- Mixed policy: A mixed policy is a combination of two policies: the voyage policy and the time policy.
- Named policy: Named policy is one of the most popular choices for marine insurance. This insurance document states that the policy is covered in the name of the ship.
- Port Risk Policy: This policy ensures the protection of the ship when it is stationed in a port.
- Fleet policy: Fleet policy covers various ships that belong to ship owners or shipping corporations. Under this policy, old ships can also be insured. Moreover, it is a time-based policy.
- Single Vessel Policy: The single vessel covers only one vessel.
- Blanket policy: When buying this marine policy, the owner is required to bear the full amount of protection.
Who is eligible to get the marine insurance policy?
- Manufacturers
- Buying agents
- Buyers
- Import/export merchants
- Sellers
- Banks
- Contractors or
- And others who are involved in the business of the movement of goods
Steps to Claim the Marine Insurance Policy
- In the event of any loss or misfortune to the cargo or the ship, you can inform the insurance provider.
- A surveyor will inspect the damage or loss mentioned.
- In the marine insurance application form, you need to fill in all the details of the proofs and witnesses.
- You must notify the insurance company of a missing package by filing a monetary claim and receiving an acknowledgement for it.
- If there is relevance in the case, the insurance provider will approve it or else reject it.
- You can approach the court proceedings if you are not satisfied with the case.
The documents required to claim the Marine Insurance Policy
- Duly filled out the claim form
- Original insurance certificate with the policy number
- Copy of Billing and Lading
- Survey report or missing certificate
- Original invoice , packing list , and shipping specification
- Copies of correspondence exchanged
What clauses are covered for marine insurance?
One can comprehend the maritime insurance coverage by examining the risks faced by the insurance providers with different marine insurance clauses:
- Maximum Coverage (Clause A): It covers losses due to theft, breakage, chipping, denting, bruising, all-water damage, and non-delivery.
- Additional Coverage (Clause B): It shields the cargo against hazardous situations, such as earthquakes, volcanic eruptions, heavy rain, or sea water.
- Basic Coverage (Clause C): In the event of unfortunate accidents, such as the sinking of the ship, a fire explosion, a collision, or other mishaps, marine insurance covers the shipment.
What is not covered under the marine insurance policy?
- Issues of Delivery
- Intentional Misconduct
- Poor Quality of the Perishable Goods
- Potential Delays
- War Breakout
Conclusion
Whether you own a ship or a shipping corporation, marine insurance can assist with protecting your goods and investments. Exporters can ensure their claims by closely collaborating with the insurers to ease the process of recovering losses or spoilage of the perishable goods during transit. This effective approach not only protects against possible risks but also nurtures confidence in international trade transactions.
Citrus Freight provides reliable marine insurance solutions to protect your shipment throughout its export journey, from departure to arrival. If you are new to the export sector, you can make the desired choice of marine insurance claims at Citrus Freight.
Our dedicated customer support at Citrus Freight is available both online and offline to provide you with the best maritime solution.