What are the Special Features and Characteristics of Marine Insurance Policy?

Updated on Jan 12, 2024

What is Marine Insurance Policy?

Marine insurance is an agreement between the insurer and assured where the insurer undertakes to indemnify the assured under Section 3 of the Marine Insurance Act 1963. Marine insurance covers the loss or damage of ships, terminals, cargo, and any transport by which goods are transferred, acquired, or held between the points of origin and the final destination.

Marine insurance plays an important role in any kind of shipping business by safeguarding you against the risk of damage or loss to cargo, ships, or any transport by which the goods or property is transferred, acquired, or held between the points of origin and the final destination. There are various types of marine insurance policies in India that can suit different needs and requirements. Availing the best online marine insurance policy can help businesses to mitigate the financial pitfall that can happen due to loss or damage of goods in transit.

Types of Marine Insurance Policy

There are 4 types of Marine Insurance, which are as follows:

1. Freight Insurance
2. Liability Insurance
3. Hull Insurance
4. Marine Cargo Insurance

Importance of Marine Insurance

Many import-export trade processes require marine insurance as a necessity. Under marine insurance, both parties are contractually required to pay for the cost of the goods, but there are other factors to consider before deciding that you need this kind of insurance when transporting your cargo.

1. Proposal and Acceptance

It is based on a general proposal and acceptance concept. Coverage of risk will start from the date of acceptance of the proposal by the insurance company. Any loss or damage to goods in transit occurring prior to the date of acceptance of the proposal will not be covered under the marine insurance policy.

2. Payment of Premium

Marine insurance cover will also start from the date of payment of the premium. If the payments are made in a cheque, the date of realization of money will be considered for providing the risk coverage.

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3. Contract of Indemnity

Marine insurance is a contract of indemnity. That means, the insurance company is liable to compensate only till the extent of the actual loss suffered. There is no liability lies on the part of the insurance company if there is no actual loss suffered. For example, let’s say an insured has a marine insurance policy for Rs.25 lacs. In the event of loss, the actual loss was estimated as Rs.15 lacs. In this case, the insured will not receive compensation of more than Rs.15 lac even if the coverage is Rs.25 lac.

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4. Insurable Interest

Marine insurance gets applicable only if the insured has an insurable interest in the subject matter (insurable property) at the time of loss. The requirement of insurable interest to be present only at the time of loss makes the marine insurance policy ‘freely assignable’. The policy can be assigned freely prior to or after the occurrence of damage or loss unless the terms and conditions of the policy restrict it.

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5. Utmost Good Faith

Marine insurance policies work on the principle of utmost good faith. The owner of the goods or property to be transported must disclose all the required information accurately to the insurance company at the time of availing the marine insurance. Non-disclosure, misdescription, or misrepresenting of facts and information by the insured makes the marine insurance policy voidable at the time of claim.

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6. Principle of Subrogation

Marine insurance policy works on the principle of subrogation. But the right of subrogation arises only after the payment has been made to the insured. After settling the marine insurance claim, the insurer holds all the right to sue the third party who is responsible for the loss. In this case, an insurer can recover the amount of compensation paid to the insured from the third party. The aim of the principle of subrogation is to ensure that the insured receives the compensation only for actual loss suffered.

7. Principle of Contribution

The principle of contribution applies in the case of multiple marine insurance policies. Losses will be paid proportionately if the insured holds multiple policies for his goods or property. For instance, goods worth Rs.40 lac are insured with two different insurers. And there is a loss of goods in the marine event, the total amount of loss will be compensated to the insured proportionately by both the insurance companies.

8. Comes with Warranty

A Marine insurance features is that its policies come with a warranty which is a legal undertaking between an insurance company and the insured. It’s basically a legal obligation by the insured. Marine insurance policy stands cancelled or terminated as soon as there is a breach of warranty. Warranty can be an express warranty that is expressly included in the policy or can be an implied warranty that is not included expressly in the policy but is assumed and understood by both the parties in the contract.

What are the Features-advantages of a Marine Insurance Contract?

• The insurance provides financial stability to the business in Case any mishappening
• Helps manage the risks and operate business without any worries
• It compensates for any financial loss that Business faces during the transit of goods
• Mitigate the risk in cargo theft
• To Increase cases related to containers lost at sea every year

Some of the Perils Covered Under Marine Insurance Policy Are:

• Fire and explosion
• Perils of the sea
• Jettison
• Breakage
• Accident
• Theft
• Barratry
• Non-delivery
• Pilferage

Conclusion

To conclude, marine insurance policies ate loaded with many features. With a variety of marine cargo insurance policies available out there as per the specifications, need and requirement, getting the customized marine insurance plan to suit the business requirement is all the more important to mitigate the risk efficiently.

Choose wisely!

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