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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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. 

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.

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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. 

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. 

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 interest 
  • The policy has to be legally valid and must be legally liable in case there is any damage or loss 

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. 

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. 

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.

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.

Written By: PolicyBazaar - Updated: 03 May 2023

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Policybazaar for Business - Marine Insurance - Customer Reviews
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Based on 114 reviews
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3.8 April 20, 2023
Great Experience
I recently purchased Marine insurance from Policybazaar for my shipping business and I must say I am thoroughly impressed with their service and coverage. From start to finish, the experience has been smooth and hassle-free.Thankyou.
4.3 April 03, 2023
Provides Comprehensive Protection
When it comes to coverage, Marine insurance that i bought from PolicyBazaar has exceeded my expectations. It provides comprehensive protection for my cargo and vessels during transit, ensuring I can focus on my business operations with peace of mind. Thankyou.
4.3 March 17, 2023
Excellent Services
I highly recommend Marine insurance from PolicyBazaar website to anyone in the shipping or logistics industry. Their user-friendly website, comprehensive coverage, and excellent customer service make them stand out from the competition. With Policybazaar, I feel confident in navigating the high seas, knowing that my business is well-protected. Thank you, Policybazaar.
4.3 February 28, 2023
User Friendly Interface
The website's user-friendly interface made it easy to compare different plans and find the perfect fit for my business needs.Thanks
4.3 February 11, 2023
Prompt Services
I appreciate the transparency and honesty with which Policybazaar handled my claims. They were prompt in processing my claim and their claim settlement process was hassle-free.Thanks PolicyBazaar.
3.8 February 10, 2023
Exceeds Expectations
I recently had the pleasure of purchsing marine insurance from Policy bazaar website and I must say it has been an outstnding experience from start to finish. I am thrilled to share my positive customer review, as this truly exceeded my expectations. Thanks PB.
3.8 January 31, 2023
Easy Navigation
The ease of navigating the Policy bazaar website and finding the right marine insurance policy was impressive. The website's user-friendly interface and intuitive design made it incredibly simple to compare various options, understand the coverage details and make an informed decision. I appreciated the transparency provided throughout the process. Thanks.
3.8 January 21, 2023
Excellent Support
The customer service provided by Policy bazaar was decent. Their team was responsive, knowledgeable and went above and beyond to assist me at every step. Their professionalism and commitment to customer satisfaction were truly commendable.Thankyou.
4.3 January 11, 2023
Sanjeev Rathor
Efficient Process
When it came to claims processing, Policy bazaar demonstrated remarkable eficiency and effectivenes. I had an unfortunate incident during the coverage period and filing a claim was a breeze. The entire process was streamlined and their team guided me throuugh every necssary step, making it hassle-free. The promptness with which my claim was setled reflected their commitment to their customers' well-being and peace of mind. Thankyou.
3.8 January 01, 2023
Comprehensive Coverage
I must mention the comprehensive coverage provided by the marine insurance policy I purchasd through Policy bazaar. It offered me the necesary protection and peace of mind. Thankyou PolicyBazaar.