Major Reasons to Buy Marine Insurance if you are a Shipper

Due to the increase in trade and globalisation, businesses are now becoming more dependent on different types of insurance to protect their bottom lines. There is an increase in demand for marine insurance for shippers due to rough weather, a rise in pirate incidents and potential cross-border shootouts, labour stoppages and other unavoidable reasons. Therefore, it is always recommended to buy marine insurance to prevent any loss due to such events. In this article, we will discuss in detail the reasons to buy marine insurance, especially for a shipper.

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Reasons to Buy Marine Insurance for a Shipper

When shipping to other parts of the globe, the following are the main reasons to buy marine insurance for trade safety:

  1. Increase in Cargo Robberies

    Global supply networks are hampered by cargo theft, which has a direct financial impact on shipowners. Cargo thefts are becoming more advanced and well-planned leading to humongous losses to the exporter or the shipper. There have been high pieces of evidence of fraudulent pickups and false names; increasing the instances of cargo theft at an alarming rate. Thus, a shipper should buy marine insurance to protect against losses.

  2. Disaster can be Experienced Anywhere

    Seas and oceans are highly prone to disasters like typhoons, storms, cyclones, shipwrecks, pirate attacks, and others. These calamities come uninformed and are rarely avoidable. Marine insurance safeguards the shipper from such calamities. If the route of the ship is exposed to areas that are highly prone to natural calamities or pirate attacks, it is a smart option to buy marine insurance.

  3. Damages to Cargo

    A cargo is considered to be damaged when a shipment upon receipt by the buyer is in a bad condition. The reasons behind cargo damage can be due to rolling, dropping, breaking, being knocked, orpoor warehousing facilities. Even after taking precautionary measures, damages can happen and if the cargo is not covered under marine insurance, the shipper might suffer huge losses.

  4. Carriers are not Liable for Any Losses

    By law, carriers are excluded from being for losses arising from various factors. In some cases, even if they are termed liable, the carriers usually restrict their responsibility. Therefore, shippers should buy marine insurance to avoid financial losses.

  5. Contractual Requirement:

    Many shippers may require to buy marine insurance policies as stated in their contracts. The Shipper’s Sale Contract may make marine insurance mandatory for the shipper, failing to do so will leave the shipper liable for financial loss.

  6. Customisation:

    Customising marine insurance is not a difficult task. These days insurance companies allow for customisation based on the need of the insured.

Case

Royal Exports Ltd. deals with the export of fabrics. The shipper was not too keen on buying marine insurance. However, the buyer of the consignment stated in the contract, that the shipper needs to mandatorily buy marine insurance. Royal Exports Ltd. thus purchased a marine insurance policy to fulfil this requirement. Unfortunately, due to a sea storm, a major portion of the consignment was lost. Thanks to the marine insurance policy, the losses were covered.

Conclusion

Marine Insurance is advantageous as it provides coverage for the loss or damage to the cargo, ships, and from the place of origin and the destination. As a shipper, before you decide to risk your consignment and skip insurance, make sure you understand the potential losses your business might have to suffer. The above reasons to buy marine insurance can help shippers in ways more than one and should not be ignored.

Written By: PolicyBazaar - Updated: 04 January 2023