Meaning of Insurable Interest in Marine Insurance Policy
Among so many important insurance terms, the meaning of insurable interest in marine insurance can be confusing for many. If you’re a new business owner or are simply here to understand the principles of marine insurance policy better, this article will help you understand the concept of insurable interest.
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Meaning of Insurable Interest in Marine Insurance Policy
What is Insurable Interest in Marine Insurance?
Simply put, insurable interest in marine cargo insurance means your reasons for buying marine insurance should be genuine and valid. If you’re planning to get your shipment or cargo insured, your interest should be vested in their safe arrival.Â
If your shipment reaches safely the intended destination, then it should be an advantage to you. Similarly, if your shipment is damaged, then it is against the interests for which you have purchased the insurance. This is called the insurable interest of the insured person, whose interests and profit are directly related to the safe arrival of the goods.
Main Characteristics of Insurance Interest
Interestingly, insurable interest does not necessarily be present from the beginning. Especially in the case of a marine open insurance policy, chances are that the insured may not have an insurable interest when the policy was purchased, but eventually becomes their matter of interest.Â
However, it is necessary to have an insurable interest in the shipment, especially at the time of a loss or damage to the goods to claim reimbursement.Â
This is common if there are several parties involved, or in case there is a change in ownership of goods involved. Insurable interest should have the following characteristics to be legally binding under a marine insurance policy:
Insured interest must be fixed and definite with no scope of ambiguity
An estimate of the value of goods should be clear
Insurable interest should exist during the insurance proposal
Insurable interest must be present before there is any loss to the insured property
There should be a significant quantum of insurable interestÂ
The policy has to be legally valid and must be legally liable in case there is any damage or lossÂ
These have been discussed with the help of some case scenarios later in the article.
Case Scenario 1
PCS is a food products exporter from India delivering processed food items to the US worth millions of dollars.Â
While a majority of their goods are CIF, PCS has to bear too the cost, insurance and freight expenses until they reach the buyer in the US. In this case, PCS has an insurable interest in the goods till it has safely reached the US.Â
Once the goods have arrived and been transferred to the interested buyer, the insurable interest will not transfer to the buyer once they have confirmed the safety and quality of the goods received. In case of any damage to the goods after this transfer, the US buyer can file a claim up to the sum insured with the insurance company later.
Case Scenario 2
Second Flight Logistics is a transport business dealing with the shipment of fragile items and operates throughout India. The company purchased 4 heavy-duty trucks and got them financed from 4 different banks.
Since these banks need the trucks to be insured, this can be done if:
The Logistics company buys insurance for all the trucks and bears all the costs. They will need to repay the loan in case of a total loss (damages beyond repair) of the truck to the financing bank.
The Logistics company and the financing banks insure their property separately.
The Logistics company buys marine insurance and assigns it to the financing banks. In case a claim arises, the Logistics company will get compensated after the financer's claim is satisfied.
Marine Insurance Premium Calculator
New machinery or equipment for industrial use
Iron & steel rods, metal pipes, tubes
Electronic and white goods
All types of FMCG commodities
All kinds of food like oils essence flavours and other various packed items
Automobiles
New machinery machine tools and spares in closed ISO containers
Solar panel
Machinery machine tools spares duly packed/lashed
Stationery items
Timber and wood products
Edible oil in tanker
Aggregators/Transporters
All types of containers
All types of paints duly packed
Auto spare parts
Ceramic products and tiles
Edible vegetables or fruits and nuts or peel of citrus fruits
Granite and marble
Metal hand tools
Metal scrap in ISO container
Metals of all types excluding precious metals
Non hazardous chemicals in bags
Pharmaceuticals and bulk drugs
Rough marble in blocks
Toys, games and sports equipment
Used CPM machines and equipments
Used machinery machine tools and spares in closed ISO container
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Wrapping it Up
Having a marine insurance policy will secure the interests of the business persons involved, including the financers and sellers. Insurable interests ascertain that these claims are valid and all the parties involved can financially recover in case of a mishap.
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 Policybazaar3183 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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