Types of Contracts in Marine Insurance

Doing business has an element of risk. The risk multiplies when goods are in transit from one place to another. If you are an exporter, you are exposed to a higher risk until your goods reach their final destination. Thus, choosing the right marine insurance plan is very crucial. So, let us tell you about the different types of contracts in marine insurance.

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What is a Marine Insurance Contract?

Many business owners often misunderstand marine open policy as a complex proposition. However, businesses must be properly insured to avoid financial setbacks in the event of an accident or any unprecedented event.

It is an agreement between the insurer and the insured wherein the insurer agrees to pay, per the agreed terms, the damages or losses that occur during the marine journey. This contract also includes incidents that occurred during any mode of transportation. Goods that are shipped by air or roadways also come under marine insurance. The basic principles of a marine insurance contract are derived from the Marine Insurance Act of 1963.

Marine cargo insurance plans are crucial for various reasons. One of the key reasons for buying a marine insurance policy is that marine accident is widespread and highly expensive too! Recovering the loss from standard marine insurance is not an easy task. 

Getting a customized marine cover plan can make a huge difference and put you in a better financial situation vis-à-vis not having a marine insurance plan.

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Features of Marine Insurance Contract

Just like any other insurance contract, a contract of marine insurance is also based on the following principles

  1. Proposal and Acceptance
  2. Premium Payment
  3. Contract of Indemnity
  4. Insurable Interest
  5. Utmost Good Faith
  6. Subrogation
  7. Contribution
  8. Claims

Types of Contracts in Marine Insurance

It can be broadly categorized into four.

  1. Hull Insurance: Insurance of the vessel, vehicle, and equipment are included under the hull insurance. The word “Hull” refers to the body of the vessel. Ocean-going vessels are majorly classified as sailing vessels, ocean steamers, builders, and so on. This insurance covers the damages and losses against the body frame and the items on the vessels that come under the purview and responsibility of the vessel owner.
  2. Cargo Insurance: This policy refers to the insurance of cargo or goods contents on the ship while in transit. It covers damages and losses of goods that take place during transit by way of road, rail, sea or air. It also covers third-party liabilities.
  3. Freight Insurance: Simply put, freight insurance can help protect against freight loss. For example, the shipping company would lose freight if the loss is incurred during transit. This insurance cover will allow the operator to compensate for damages incurred if they were not under his control.
  4. Liability Insurance: Any liability due to a ship crashing or colliding shall be covered under liability insurance.

 Marine Insurance Contract Advantages

As a business person, if you are engaged in the transfer of goods, marine insurance benefits cannot be ignored. A marine insurance policy can ensure the safety of your goods while they are being transferred. Here are a few advantages of a it are as follows:

  • It provides financial stability to the business in the event of a mishap or unrecoverable loss
  • It provides maximum coverage against a wide range of risks
  • It provides various options and plans as per the need and budget of the customers
  • It helps manage and mitigate risk

Final Words

Marine shipping involves a lot of thought, planning, complex dealings and the incorporation of risk mitigation tools. A marine insurance contract can help mitigate financial risks and losses to the property, including vessel, goods, etc. Since customisation is possible, businesses should carefully decide on picking up the right marine insurance policy that mitigates the risk efficiently.

Written By: PolicyBazaar - Updated: 28 December 2022