Insurance Advisory Newsletter – All About Marine Insurance : November 2023

Marine Insurance

Marine Insurance is a type of insurance that covers risks that may take place when the goods or cargo is in transit (“Marine Insurance”). Marine Insurance covers any loss or damage caused to a ship, cargo, depot, terminal or any other transport by which goods/ commodities are transferred from one destination until it reaches its final destination.

Any entity, individual or company (“Insured”), whose goods are being transported by sea or by road, could suffer a financial loss if damage is caused to the goods during transit and can seek insurance from Marine Insurance policy. 

As per section 3 of the Marine Insurance Act, 1963, marine insurance is defined as – “An agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.” 

Despite the name, marine insurance covers all means of cargo transportation i.e., railways, road, sea, air or courier. It includes onshore and offshore exposed vessels such as ports/ terminals, platforms, etc.

Who Benefits from Marine Insurance?

• Ship owners and operator
• Cargo owners
• Ports and Terminals owners
• Marine contractors 
• Marine surveyors and inspectors
• Exporters, importers, local manufacturers, local traders, logistics providers and even individuals.

Advantages of a Marine Insurance Policy:

As goods transited through ships and marine are always exposed to a lot of risks, seeking Marine Insurance is the most reliable method of getting compensation for any damage or loss that may occur during such transit.  An inclusive Marine Insurance policy can be a boon to an Insured engaged in transporting goods as they can protect themselves from the risk of incurring huge financial losses that may occur during the transit of goods. Additionally, the loss in these situations is always extremely expensive and Marine Insurance is the best way to mitigate losses.

What are the types of Marine Insurance?

In India, we commonly find-

• Hull Insurance, mainly covers any physical damage that may be caused to the vessel carrying the goods and commodities such as the ship, train, plane, truck, etc carrying the goods.
• Inland marine insurance which covers property in transit over land, certain types of moveable property, instrumentalities of transportation such as bridges and tunnels, and legal liability exposures of bailees.
• Cargo Insurance covers any physical damage that may be caused to the goods and commodities that are being transported. 

Types of policy based on policy structure- 

• Specific Marine Policy
• Marine Open Policy 
• Sales Turn Over Policy

Specific Marine Policy: 

Under this policy, coverage is provided for specific goods and for a specified journey from one point to the other only. Only the damages and losses that take place at the time of the specific journey with regard to the specific goods will be covered by this policy.

Marine Open Policy:

The Marine Open Policy is issued to cover several shipments of the insured from any destination to another for a limited time frame, usually for 12 months. The period of insurance depends on the sum insured as well as the value of the insured cargo. 

STOP Policy: 

Marine Sales Turn Over Policy, commonly known as STOP is a comprehensive solution for the Insurer. Instead of the value of the cargo shipment, STOP policy covers all transits that are required to achieve sales. Under STOP policy, the Insured’s estimated annual sales turnover can be covered as a single amount and all the Insured’s insurance requirements are met under this single policy. The Insured only needs to submit the company’s sales turnover figures from time to time. This STOP policy leads to a sizeable amount of savings on the premium as the premium is charged on the sales turnover.

Coverages and exclusions of Marine Insurance

Most common coverages and exclusions under the Marine Insurance:

*Please note, inclusions and exclusion may vary from insurer to insurer and policy to policy.