5 Clauses an Exporter Should Consider While Buying Marine Insurance
An exporter has several clauses to consider while buying marine insurance. A marine policy covers several types of losses and damages caused to the ship, cargo, and its machinery and equipment. The coverage of the marine policy is accentuated in the insurance contract. Hence, the insured must consider the clauses written under the insurance contract before signing the agreement. Marine insurance claims are highly dependent on policy wording. According to industry insights, a large percentage of claim disputes in marine insurance arise due to a misunderstanding of clauses and coverage scope. This makes it essential for exporters to clearly understand the clauses before purchasing a policy.
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5 Clauses an Exporter Should Consider While Buying Marine Insurance
TL;DR
Marine insurance clauses define what is covered, excluded, and how claims are settled
Choosing the right clauses, like ICC A, warehouse-to-warehouse, and valuation clause, directly impacts claim success
Over 72% of shipping companies rely on marine insurance to manage risks like cargo damage and piracy
Cargo damage and fire are among the most frequent and costly marine insurance claims globally
Incorrect clause selection can lead to partial settlement or claim rejection
Exporters must align clauses with cargo type, route risk, and coverage needs
What are Marine Insurance Clauses?
Marine insurance clauses are the specific terms and conditions mentioned in the policy that define what is covered, what is excluded, and how claims are settled. These clauses play a critical role in determining whether a loss will be compensated or rejected.
For exporters, these clauses are not just technical details. They directly impact financial protection, claim approval, and overall risk management during transit.
Clauses to Consider While Buying Marine Insurance
The marine incidents are unforeseeable. It may occur at any moment. Therefore, the exporter and business must subscribe to marine insurance policies in order to avoid losses.
However, the exporter must note that every contract includes several clauses that the parties. A marine policy is also a contract between the insurer and the insured. Hence, the clause contained in the agreement shall be enforceable.
Let us discuss the clauses to consider while buying marine insurance.
Types of Marine Insurance Clauses
To simplify understanding, marine insurance clauses can be grouped into:
Coverage clauses (Institute Cargo Clauses A, B, C)
Risk-related clauses (war, strike, perils)
Transit-related clauses (warehouse-to-warehouse, at and from)
Special clauses (valuation, sue and labor, memorandum, Inchmaree)
This grouping helps exporters align coverage with real business risks.
Perils Coverage
The perils or risks in the marine policy include the following.
Maritime Risks
The maritime perils include two events created by god and humans. The God events include earthquakes, storms, lightning, volcanic eruptions, collisions, etc. While man-made events include fire, piracy, vandalism, smoke, etc.
Extraneous Perils
These risks commonly occur due to faults in loading, unloading, or carrying of the goods.
War
The insurance policy covers a war clause under the risk section. The war includes revolution, civil war, etc. Nonetheless, the seizure of goods by customs officers shall not be covered under such a clause.
Strike
It includes damages or loss caused to the ship due to strikes, riots, or labor disturbances on the ship. Further, it also includes terrorist activities.
Institute Cargo Clause
The institute cargo is an important clause to consider while buying a marine insurance policy.
These clauses are:
Institute Cargo Clause A
It is also an "all risks" clause since it covers maximum risks. The insured may obtain the widest coverage by including clause A. As a result, it is the most expensive clause in marine policy.
Use case: Ideal for high-value or fragile cargo such as electronics or pharmaceuticals where maximum protection is required.
Institute Cargo Clause B
The insured is required to pay a moderate sum in order to add clause B to the insurance contract. The coverage under clause A is restricted to some risks. As a result, the insured obtains claims for partial cargo.
Use case: Suitable for medium-risk goods where balanced coverage and cost are required.
Institute Cargo Clause C
It is the most restrictive clause among clauses A, B, and C. It covers limited risks. The main risks covered by this clause are:
Collision
General Average
Fire or explosion
Average sacrifice
Use case: Best for low-risk bulk cargo where cost-saving is the priority.
At and From Clause
The ' at and from clause’ is an essential clause to consider while buying a marine insurance policy. It generally covers hull and freight insurance. The risk is covered when it starts. For example, if the clause mentions ' at and from Chennai', the policy shall cover the risk from the time the ship is present at the Chennai port and departure from the port.
Warehouse to Warehouse Clause
It ensures the safe arrival of products from one warehouse to another warehouse. In other words, this clause covers the risks on land along with the risks involved at sea. For example, in order to export the goods, the insured requested that it be taken from the warehouse to the port. Further, while unloading the goods, the shipper sends them to be kept in the warehouse.
This clause is critical because nearly 68% of global cargo shipments are insured, ensuring end-to-end protection during transit.
Jettison
This clause is applied in an emergency. Under this clause, the insured throws some goods present on the ship in order to lighten the weight and avoid the risk of sinking. The master of the ship is required to determine the item to be unloaded from the ship. However, this clause is only applicable if the insured succeeds in his activities.
Additional Important Marine Insurance Clauses Exporters Should Know
Valuation Clause
Defines how the value of goods is calculated at the time of claim. Incorrect valuation can lead to underinsurance and reduced claim payout.
Sue and Labour Clause
Covers expenses incurred to minimize losses. For example, if exporters take steps to save cargo during a storm, those costs may be reimbursed.
Memorandum Clause
Specifies partial loss conditions. Certain minor damages may not be covered unless thresholds are met.
Inchmaree Clause
Covers losses caused by machinery breakdown or negligence of crew, which are otherwise not covered under standard policies.
Change of Voyage Clause
Provides protection if the shipment route changes unexpectedly, subject to insurer approval.
Real-Life Examples of Marine Insurance Clauses
A shipment of electronics damaged during a storm was fully covered under ICC A due to all-risk coverage
A food shipment that spoiled due to a delay was rejected under the memorandum clause
Emergency expenses to save cargo during rough weather were reimbursed under the sue and labor clause
These examples highlight how clauses directly impact claim outcomes.
How Marine Insurance Clauses Impact Claim Settlement
Claims in marine insurance are not just based on the incident but on the clauses selected. A wrong clause or misunderstanding can lead to claim rejection or partial settlement.
Interestingly, shipping losses have reduced significantly over time, with only 27 major vessel losses reported globally in 2024, but claim severity remains high due to expensive cargo.
How to Choose the Right Marine Insurance Clauses
Based on cargo type, such as fragile, perishable, or bulk goods
Considering the transit route and associated risks
Evaluating risk exposure, including piracy or weather conditions
Balancing budget with coverage needs
Reviewing claim support and insurer reputation
Common Mistakes Exporters Make While Choosing Clauses
Choosing ICC C for high-risk cargo to save premium
Ignoring exclusions mentioned in clauses
Not understanding the valuation clause properly
Overlooking transit risks beyond sea journey
Differences in Clause Coverage Across Insurers
Marine insurance clauses may appear standard, but coverage interpretation can vary:
Policy wording may differ slightly across insurers
Add-ons and extensions vary
The claim settlement approach differs
This makes comparing policies essential before purchase.
Final Thoughts
Marine insurance clauses are not just technical jargon. They define the real protection your business receives during transit. Choosing the right clauses ensures that when something goes wrong, your claim does not. A well-structured policy backed by the right clauses can make the difference between a financial setback and a smooth recovery.
Frequently Asked Questions
Which clause is best for exporters?
ICC A is generally preferred as it provides the widest coverage, especially for high-value goods.
Are all marine insurance clauses standard?
While many clauses are based on international standards, insurers may have variations in wording and coverage.
What happens if I choose the wrong clause?
It may result in claim rejection or partial settlement.
Disclaimer: Above mentioned insurers are arranged in alphabetical order. Policybazaar.com does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.
Marine insurance is essential for protecting goods during...Read more
23 Oct 2024 by Policybazaar3395 Views
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*Savings of 42% are based on the comparison between the highest and lowest premiums for a Rs 50 lakh sum insured under Inland Transit Clause B or Institute Cargo Clause B for single transit cover of auto spare parts with shipment type of Inland(Domestic) and road as mode of transport. Premium varies on the basis of Occupancy, Business Activity & Coverage Type By clicking on "View Plans" you agree to our Privacy Policy and Terms Of Use and also provide us a formal mandate to represent you to the insurer and communicate to you the grant of a cover. The details of insurance coverage, inclusions and exclusions are subject to change as per solutions offered by insurance providers. The content has been curated based on the general practices in the industry. Policybazaar is not responsible for the factual correctness of these details.
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