6 Not to Forget Principles of Marine Insurance

Marine insurance is not of recent times and is one of the oldest forms of insurance. Besides, with time, it has developed with the expansion of trade.

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Marine insurance is essentially concerned with overseas trade. There is a trade, which involves the transportation of goods from one place to the other through ships. Now, this process of transshipment of goods from one place to the other has its fair share of risks.

Therefore, it becomes important to secure these goods. Besides, marine insurance is important as it offers protection against any damage/loss incurred to the ship and to the cargo, which the ship is transporting.

Whether you own a ship or yacht for any commercial or any transportation purpose, marine insurance policy will secure you from every marine-related peril.

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Important Principles of Marine Insurance

There are certain important principles, which govern marine insurance. Let us have an understanding of each of the principle below:

  1. Principle of Good Faith: The marine insurance policy strictly reckon upon the principle of good faith wherein while filing the marine insurance policy document every information given by the applicant must be correct. Besides, there should not be any discrepancy by the applicant. In case, if the applicant gives false information or hides any information, then the marine insurance providers have all the rights to reject the marine insurance policy application. 
  2. Principle of Insurable Interest: Based on this principle, while buying marine insurance policy the insured must have some insurable interest for whom the insurance is bought in the subject. This helps the insured to get an advantage when the goods are arrived securely likewise suffer a loss in the case of hampered goods.
    On the off chance, there is a possibility that while buying the marine insurance policy the insured does not have an insurable interest. So in such a case, the insurer needs to be mentally prepared he would get such interest in the nearby future. Remember, it is essential to have an insurable interest or else the insured will not be able for a claim settlement from the insurance provider.
  3. Principle of Indemnity: This should clearly be understood even before buying the marine insurance policy that the insured will only be able to receive compensation depending upon the loss. The compensation to be received by the insured in any case would not be more than the incurred actual loss.
    So, buy marine insurance when required and not to earn profits.
  4. Principle of Proximate Cause: When a loss incurs, the insured will contemplate the proximate cause to understand the actual fount of the loss as there is a possibility of series of causes, which could be attributed for the incurred loss.
    To be precise, to determine the liability the remote cause for the loss is not required. Therefore, when the proximate cause is insured, the insurance provider needs to settle the claim.
  5. Principle of Subrogation: In simplest words, the principle of subrogation follows the principle of indemnity wherein the insured is not allowed to make any profits out of the incurred loss. It is precisely the shift of the rights and remedies of an insured to an insurer who has recompensated the insured in terms of the loss.
    For instance, let us consider a situation wherein furnishings worth Rs. 1, 00,000 are insured against fire and ignition. Now, supposedly the furnishing is burnt down. Here, the insured is paid the complete amount of Rs.1, 00,000 by the insurance provider. Now, the damaged furnishing is sold for Rs, 10,000. The insurer will receive an amount of Rs, 10,000.
  6. Principle of Contribution: There are chances that certain goods might be insured with more than two insurers against the same perils. Under such circumstances, the insurance provider needs to split the weight of payment in proportion to the insured amount by each.

The Legal Approach

Marine insurance is represented by national lawful systems. In India, Marine Insurance Act, 1963, manages different parts of marine protection.

In any case, the way that unique national lawful systems exist, in the lead of marine insurance business, hosts certain ramifications for the parties to contract, especially the insured, who will experience issues in understanding the inclusion of remote insurance showcase.

Without the consistency in the national marine insurance lawful systems, the international conduct of marine insurance, especially from the guaranteed' point of view, would be seriously hindered.

Consequently, given the worldwide character of marine insurance, there is a requirement for harmonization of the legitimate systems administering the rights and commitment of the parties to the insurance contract including universal transport and exchange.

Read more: Different Types of Marine Insurance Plans

Wrapping it Up

Marine insurance is a component that assists with relieving the dangers of monetary misfortune to the property, for example, ship, merchandise or different movables, in the oceanic vehicle, on the installment of premium by the insured to the insurance provider.

The insurance provider gives peril cover to the ship-proprietors or the cargo proprietors against misfortune or harm that the ship or freight may endure in travel because of mishaps and disasters like a monetary reimbursement.

The insurance provider attempts to make great the misfortune to the extreme incentive as concurred with the insured risks or dangers. Misfortune is payable just when it has been proximately brought about by the safeguarded risk.

Written By: PolicyBazaar - Updated: 28 December 2022