Why Should You Know About Marine Loss?
Marine losses may come in different forms and are not easily quantifiable. With marine insurance, the financial losses can be taken care of, but it becomes even more important to understand the marine losses and how can one go ahead with claim settlement in case of an unfortunate event.
- Helps evaluate the risk exposure per transit, cargo, vessel or trade
- Helps understand the exclusions and the total recovery amount
- Helps analyse the cash and other requirements for each trade or transit
- Helps decide the riders in the policy
Types of Marine Losses
Marine losses are broadly classified into two namely, total loss and partial loss. Let us look into the details
Total marine loss occurs when the insured goods have lost 100% or near 100%. of their value. The type of marine loss is further subdivided into Actual Total Loss and Constructive Total Loss.
Actual loss is when the cargo is destroyed to an extent where there is no likelihood of recovering goods. To be categorized under actual loss, below of one or more conditions need to be met:
- When the insured cargo is damaged entirely or to an extent where it cannot be fixed
- The insured cargo is in a state that wherein is not accessible altogether
- The vessel which had the cargo goes missing, and there is no chance of its retrieval.
Actual total loss is an absolute physical loss. When an actual total loss arises, the insurance company becomes liable to pay for the loss by clearing the claim.
This type of marine loss refers to damage when the cargo is damaged to such an extent that not commercially viable to retrieve the vessel or cargo. It is when the cargo is badly damaged, and the cost of repairs and reconditioning is expected to be more than its total value. Similarly, if the cargo is safe but the cost to get back the cargo is more than the actual total cost, it is considered a constructive total loss. Constructive total loss is a commercial total loss.
It is when the cargo is partially damaged. To quantify partial loss requires discretion at the hands of the surveyor.
This is one of the most common types of marine losses. It is said to be a particular partial loss when the goods suffer partial damage due to the reasons covered under the marine insurance policy.
A general average loss is caused when the goods are damaged deliberately or voluntarily to avoid impending danger. For example, if there is chemical leakage in the vessel carrying a chemical shipment, and in order to avoid contamination, some of the containers are thrown away. The sole purpose is to preserve the common interest from impending danger.
Marine insurance can be challenging but is highly essential. Thus, it is always recommended to not just opt for adequate marine insurance coverage, but also understand the types of marine losses involved when your goods are in transit.