marine insurance

1. Meaning, Nature, Subject MattersandPrinciples of Marine Insurance
Marine Insurance
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Marine Insurance is one of the oldest form of insurance. It is the insurance
against loss by damage or destructionof cargo, freight, andmerchandise. It is
the means or instrumentsof transportationandcommunicationwhether on
land, sea, or air. (Webster)
Marine insurance is very important because throughmarine insurance the
shipowners andtransporters canbe sure of claiming damages considering
the mode of transportationused. The four transportationmodes are –road,
rail, air, and water. A contract is made betweenthe insurance companies and
insuredagainst a certainamount of premiumto protect fromthe risk of
waterways, whichis known as Marine insurance. It is concernedwith
overseas trade. International trade involvestransportationof goods from
one country to another country by ships. The persons who are importing the
goods will like toensure the safe arrival of their goods. The shipping
company wants the safety of the ship. So marine insurance ensures the
coverage of all types of risks whichoccur during the transit.
Marine insurance is a safe havenfor shipping corporations and transporters
because it helps toreduce the aspect of financial loss due to loss of
important cargo. It also helps tobring together the transporting companies
and the receiving parties, the duty, dedicationand the straightforwardness of
the insurance companies. ( Marine insight)
Nature of Marine Insurance

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Marine insurance has beendefinedas a contract betweenaninsurer andthe
insuredwhereby the insurer undertakes toindemnify the insuredina
manner so, the interest thereby will be agreed. It is the contracts of
insurance upon vessels of any description, including cargoes, freights &other
interests whichmay be legally insured. Whatever be the transitby land,
water or both and whether or not including warehouse risk or similar risk
includedamong the risks insuredagainst inmarine insurance policies. It has
two branches:
a) Ocean Marine Insurance
Marine Insurance was startedduring the middle ages inItaly and thenin
England. Oceanmarine insurance covers the perilsof the sea. Travelers
continue tomonitor the ever-changing landscape of the oceanmarine
industry tostay in stepwiththe needs. OceanMarine Insurance is one of the
strongest companies inthe marketplace today.
b) Inland Marine Insurance
Marine insurance is one of the oldest forms of insurance. Inlandmarine
insurance is relatedtothe inlandrisks on the land. It has developedwiththe
expansionof trade. In moderntime marine insurance business is well
organizedand is carriedon scientific lines. Inlandmarine insurance is
available standalone or can be packaged withother coverages. (Agrawal)

3. Subject Matter of Marine Insurance
The marine insurance may cover three types of things:
a) Cargo Insurance
The personwho is importing and the personwho is sending the goods are
interestedinthe safety of goods during the seajourney. The goods tobe
insuredare called‘cargo’. It is insuredby the owner and insurance of goods
shippedthroughwaterways is known as cargoinsurance. Any loss of goods
during the journey is indemnifiedby the insurance company. The goods or
cargoes shippedtoa foreigncountry are exposedtothe perils of the seas.
The goods are generally insuredaccording totheir value andsome
percentage of profit can alsobe includedin the value. The policies of cargo
may be special, reporting andfloating. The special policy is only for one
shipment.
b) Hull Insurance
The shipis a very important subject matter of marine insurance. The word
Hull refers to the body of the shipor vessel. The shipexposes anumber of
risks like a cyclone, collision, andarrest by foreignnaval power. The
insurance whichprotects the shipowner against the loss of the shipis known
as hull insurance. In Hull Insurance, the ship is insuredagainst any type of
danger. If the shipis damaged, the owner of the shipgets indemnity fromthe
insurance company. The shipmay be insuredfor a particular tripor for a
particular period.
c) Freight Insurance
The shipping company has an interest infreight. Freight insuranceis one of
the subject matter of marine insurance. The freight may be paid in advance
or on the arrival of goods. If the goods are lost during transit, the shipping
company will not get freight. The shipping company may insure the freight to
be receivedwhichis knownas freight insurance. Whenthe cargopays freight
at the time of shipment of goods, the ship owner losses the freight. They do

4. not reachthe port of destination. The shipowner guards against possible loss
of freight by freight insurance. (Malhotra)
Principle of Marine Insurance
Some of the principles relatedtomarine insurance are as follows:
1. Utmost Good Faith
The marine contract is basedon utmost good faithon the part of both the
parties. It is one of the important principles of marine insurance. The insured
shouldgive full informationabout the subject matter tothe insurer. He
shouldnot withholdany information.This principle is basedonthe insured
than on the underwriter. A party shouldact in good faith otherwise, the
other party may cancel the contract.
2. Insurable Interest
The insuredshouldhave an interestinthe subject matter whenit is tobe
insuredwhichmeans insurable interest. At the time of acquiring a marine
insurable policy, the insuredmay not have an insurable interest. He should
have a reasonable expectationof acquiring suchinterest. He shouldbe
benefitedby the safe arrival of commodities.He shouldget the compensation
amount of the loss or damage of goods. The insuredmust get an insurable
interest at the time of loss or damage otherwise, he will not be able to claim
compensation.
3. Indemnity
The principle of indemnity means that the insuredwill be compensatedonly
to the extent of loss suffered. There is anexceptiontothe principle of
indemnity inmarine insurance. Some profit marginis also allowedto be
includedin the value of the goods. But, he will not be allowedto earnprofit
from marine insurance. The assumptionis that the insuredwill earnthe
profit whengoods reachtheir destination. At the time of taking up the policy,
the money value of subject matter is decided. Sometimes the value is
calculatedat the time of loss also.

5. 4. Cause Proxima
This wordis derivedfromLatinword which means the nearest or proximate
cause. This principle helps todecide the actual cause of loss when a number
of causes have contributedtothe loss. To fix the responsibility of the insurer
the immediate cause of loss shouldbe determined. The remote cause of a
loss is not important indetermining the liability.
Types and Policies of Marine Insurance
Marine insurance is suchinsurance whichprovides compensationof losses
on the Hull, Cargo, Passenger andthirdparty liabilities due tomarine risks.
There is a definite categorizationof various types of marine insurance and
different types of marine insurance policies according tothe needs,
requirementsandspecifications of the transporter.
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Different types of Marine Insurance are as follows:
a) Hull Insurance:
Hull insurance is the insurance against loss causedby damage or destruction
of waterborne craft or aircraft to the owner. It is the insurance of the ship
which includes all the articles andpieces of furniture inthe ship. Hull and
machinery insurance are done toprotect the shipowner and investment in
the ship. It is a property insurance whichcovers the shipitself, the machinery

6. and equipment. If the shipis damaged, the owner of the ship gets indemnity
from the insurance company. This type of marine insurance is usually, taken
out by the owner of the ship in order toavoid any loss of the shipin case of
any mishaps occurring.
b) Cargo Insurance:
The goods sent throughwaterway is known as cargo. Cargo insurance is also
calledmarine cargo insurance. It covers physical damage or loss of your
goods while intransit by land,sea, and air. It alsooffers considerable
opportunities andcost advantages if managed correctly. It is insuredby the
owner and insurance of goods shippedthroughwaterways is known as cargo
insurance. If the cargois ruined, the owner gets the indemnity fromthe
insurance company.
c) Marine Liability Insurance:
Liability insurance is that type of marine insurance where compensationis
bought toprovide any liability occurring onaccount of a ship crashing or
colliding. In the course of the marine adventure, one shipmay collide with
another ship. The goods of another shipmay lose. Marine insurance provides
the compensationof suchliabilities nowadays if insurance has made
insurance of suchliabilities. A crew member traveling withexpensive items,
such as laptop computers, goldwatches etc. shouldmake sure that he has
such items separately insured.
d) Freight Insurance:
To transfer the goods fromone port to another, the amount paid to the
owner of the shipis calledfreight. The payment of suchfreight canbe made
in twoways: either inadvance or after the shipreaches its destinationsafely.
Freight insurance offers andprovides protectiontomerchant vessels’
corporations. It stands for the chance of losing money in the form of freight,
in case the cargo is lost due tothe ship meeting inan accident. This type of
marine insurance solves the problemof companies losing money because of
a few unprecedentedevents andaccidents occurring. (MARINEINSIGHT)
Different types of Marine Insurance Policies are listedbelow:

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1. Voyage Policy:
This policy gives more importance tothe voyage. A voyage policy is that kind
of marine insurance policy which is validfor a particular voyage. It covers the
risk from the port of departure upto the port of destination. This type of
policy is consideredmore useful for cargo. The insurance company should
give indemnity for loss/damage of any property of the insuredduring the
periodof the voyage. The liability of the insurer continues during landing and
re-shipping of the goods. The policy ends whenthe ship reaches the port of
arrival. This type of policy is purchasedgenerally for cargo. Under this policy
"from" and " to" has a great importance.
2. Time Policy:
The policy which is issuedfor a fixedperiodof time is known as time policy. A
marine insurance policy is valid for a specifiedtime periodgenerally validfor
a year. All the marine perils during that periodare insured. This type of policy
is suitable for full insurance. The policy is generally takenfor one year
althoughit may be for less thanone year. But there is no restrictiontomake
this type of policy for less thanone year. This policy is more commonly used
for hull insurance than for the cargoinsurance. The shipis insuredfor a fixed
periodirrespectiveof voyages. The policy is generally issuedfor one year. For

8. example, a periodof time from 12 march 2015 to11thDecember 2015. This
policy is effective for this period.
3. MixedPolicy:
The joint form of voyage policy and time policy is calledmixedpolicy. In this
policy, the elements of voyage policy and of time policy are combined. The
reference is made certainperiodafter completionof the voyage. The
meaning of the mixedpolicy is that a new policy takes birthfromthe
combinationof the fundamental things of time and the place policy.
Generally, this policy is usedfor shipinsurance.For example, mixedpolicy is
the policy which states the shipshouldreachfrom 1st December 2015, from
Paris to October 2015 inNew york. Policy expires whichever is met first.
4. Openor Un-valuedPolicy:
In this type of marine insurance policy, the value of the cargo and
consignment is not put down in the policy beforehand. The value thus left to
be decidedlater onis calledthe unvalued or open policy. The insurable value
of the policy includes the price of the insured's property, investment price,
incidental expenditure andall the expenditure as well.The unvaluedpolicy is
not usedin practice somuch. This policy is usedonly infreight insurance.
5. ValuedPolicy
The opposite of an openmarine insurance policy is a valued policy. In this
type of policy, the value of the cargo and consignment is ascertainedand
mentionedinthe policy document beforehand, thus, making clear about the
value of the reimbursements incase of any loss to the cargo and
consignment. Under this policy, the value of the policy is decidedat the time
of contract. Generally, the insuredamount inthis type of policy includes the
price of cargo, ship, freight andapproximate profit. Thus the value which is
mentionedinthe policy is the insuredamount.
6. Port Risk Policy:
The Port Risk Policy is taken out in order to ensure the safety of the ship
while it is stationedina port. It covers the risks whenaship is anchoredin a
port. It is an ocean marine insurance designedtoprotect avessel that is

9. portside for a long periodof time. Coverage terminatesas soonas the vessel
leaves port.
7. Wage Policy:
A wage policy is one where there are no fixedterms of reimbursements
mentioned. This is a policy heldby a personwho does not have any insurable
interest inthe insuredsubject.Hesimply bets or gambles withthe
underwriter. The policy is not enforcedby law.
8. Floating Policy:
The floating policy is also calleddeclarationpolicy. This policy is useful for
the merchant who delivers cargoregularly. Whenapersonships goods
regularly ina particular geographical area, he will have to purchase a marine
policy every time. It involves alot of time and formalities. He purchases a
policy for a lump sum amount without mentioning the value of goods and
name of the ship etc. It is the agreement betweenthe insurerandinsured
that the insureddeclares anumber of goods on the basis of shipment
documents.
9. NamedPolicy
The policy which is issuedby mentioning the name of the shipand price of
the cargo is callednamed policy. This type of policy has beenreceiving
popularity in marine insurance.
10. Block Policy
It is the policy which takes the risk inthe block that is from searoute and
land route. It does not only protect fromthe risk of the marine route but also
covers the risk occurredonthe land too. It takes the risk of transportation
from the place of the seller tothe place of the buyer. It is very useful policy
to the landlockedcountries.