Nature of Marine Insurance Contract

Definition:

Marine insurance has been defined as a contract between insurer & insured whereby the insurer undertakes to indemnify the insured in a manner & to the interest thereby agreed, against marine losses incident to marine adventure.

Section 2(13) A of the insurance Act 1938 defines marine insurance as follows:

“Marine insurance business” means the business of effecting contracts of insurance upon vessels of any description, including cargoes, freights & other interests which may be legally insured in or in relation to such vessels, cargoes and freights, goods, wares, merchandise & property of whatever description insured for any transit by land or water or both, & whether or not including ware house risk or similar risk in additional or as incidental to such transit & includes any other risk customarily included among the risks insured against in marine insurance policies.

The above definition clearly lays down the following classification of the marine insurance.

1. Hull insurance:

Insurance of vessel & its equipment are included under hull insurance. There are a number of classifications of vessels such as ocean steamers, sailing vessels, builders, risks, fleet policies & so on.

2. Cargo insurance:

It may be written under a single risk policy or floating policies. The cargo may be of any description, for example, wares, merchandise, property, goods & so on.

3. Freight insurance:

Freight is to be payable for the carriage of cargoes or if the vessel is chartered, the money to be paid for the use of the vessel. The carrier is unable to earn freight if the goods or property (called cargoes) are not safely transported.

4. Liability insurance:

The Marine insurance policy may include liability hazards such as collision or running down. Insurance can also be taken for the expenses involved in non-compliance of rules & regulation without any intention to deceive. It should be clear here that marine perils insurance covers not only the “ocean but also the inland perils.” The perils to be included in the policy are clearly defined & the
Insurer will be liable only for the insured perils.

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Know about Marine and boat Insurance

Marine Insurance policies provide the financial cover to the considering ship and its equipment and also the workers and the shipping company which has the insurance contract between the insurer and the insured. According to features of a marine insurance it has mainly two sectors namely,

1. Hull Insurance
2.1Cargo Insurance

Hull Insurance

This insurance policy provides the financial cover to the considering ship and it’s equipment and the workers and the shipping company.

Cargo Insurance

This policy can be obtained either by the cargo holder or the shipping company to protect the cargo against accidents.

Types of Cargo Insurance

Open Policy - This policy provides the financial cover against any damage that would occur to the cargo within a certain time period. Therefore the policy is open to carry goods up to the given value within the given time frame.

Valued Policy – In this policy cargo are insured only up to a specific value based on each and every journey. (Ex:- A valued policy can be obtained up to 70 million from Colombo to Singapore)

Floating Policy – In a floating cargo Insurance policy a shipping company determines of an extreme of values which are related to a specific Cargo policy since they cannot be predetermined the real value of the cargo. (Ex:- A floating insurance policy which is valued at 50-100 million) 

Compensation procedures in marine insurance

Actual Total Cost - In an event where the considering hull or the cargo is fully destroyed (100%) the total market value of the hull and the cargo will be paid as compensation. (Ex:- A ship has been fully destroyed from fire)

Constructive Total Cost – In this situation the ship and the cargo is critically damaged and they cannot be repaired. The insurance company considers this as a full loss and pays the full compensation for the cost of the damaged ship. 

General Average – Ina situation where the captain of the ship makes a decision to dispose some of the cargo with the genuine intention of protecting the other cargo and the ship. In this scenario the compensation will be paid based on general average method. In this method all cargo holders who suffer loss will be compensated from other cargo holders as well as from shipping company. ( Insurance company of shipping company and cargo holder will be compensated)

Particular Average – In this method compensation for a loss will be paid only to a Cargo holder who meets with the accident since it is a genuine accident. In this situation he has to pay compensation from his insurance company and others will not contribute to the loss. (Ex:- A specific container has been damaged in loading to a ship)

Deviation of voyage – In a situation where the considering shipping company has not followed the agreed or assigned path it is considered as a deviation of voyage. Generally insurance companies do not pay compensation in a deviation of voyage. But if the deviation has occurred due to following reasons they will pay compensation in order to repair the ship. (Situations like avoiding a natural disaster or to avoid a war zone)

Jettison – This is a specific situation where the captain of the ship or the authorized officer gives instructions to dispose some of the cargo to the sea with the pure intention of protecting all the other cargo and the rest of the ship. 

These are very basic associated with any marine insurance policy. Through understanding these basic polices it will be easy to get a marine insurance to your cargo from the top marine insurance providers.

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Marine Insurance

It is covers the loss or damage of goods at sea. Marine insurance typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.

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