MARINE INSURANCE – MEANING, FEATURES, TYPES AND KINDS

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Marine insurance can be defined as an insurance policy whereby the insurer agrees to indemnify the insured against a specified peril arising out of or related to transportation by water.

It may also be defined as a contract whereby the insurer undertakes to indemnify the insured in a manner and the extent agreed upon against marine losses.

Marine insurance covers the loss or damage of ships, cargoes, terminals or any means of water transport used to move and/or acquire property from point of origin to final destination.

It is a form of insurance that focuses mostly on international trade and water transport.

Marine insurance is a legal insurance policy covering loss and/or damage to ships, cargoes, terminals, and freight during water transportation.

Types of marine insurance

Generally speaking, there are four types of marine insurance, namely; cargo insurance, hull insurance, freight insurance and liability insurance.

1. Cargo insurance: This protects against cargo loss or damage while it is being transported from its point of origin to its final destination

It caters specifically to the cargo of the ship and also pertains to the belongings of a ship’s voyagers.

It is tailored specifically for ships' cargo and also covers the possessions of the ship's voyagers.

A cargo insurance policy is of three types namely; special policy, reporting policy and floating policy.

A. Special policy: This only covers one shipment.

B. Reporting policy: This cover all shipments made for a certain period by an exporter.

C. Floating policy: This is similar to reporting policy, with the exception that the premium is paid by depositing it with the insurance provider after estimating the value of a future shipment.

Later, premiums are modified by comparing the actual shipment and the estimates.

2. Hull insurance: This involved insuring a ship against any danger or mishap that may occur while it is on a sea voyage.

The owner of the ship typically purchases hull insurance to protect against financial loss in the event of an accident.

The ship may be insured for a particular period or a particular trip depending on the terms of the hull insurance.

The torso and hull of the ship, as well as all of its belongings, are primarily covered by hull insurance.

Hence, it is recommended that every ship owner purchase a hull insurance policy.

3. Freight insurance: Under this type of marine insurance, the shipping company ensures the freight receivable.

In freight insurance, the shipping company has an interest in freight. 

The freight may be paid in advance or when the goods arrive.

If the freight is lost en route, the shipping business will not receive freight.

Freight insurance protects merchant vessels’ corporations which stand a chance of losing money in the form of freight if the cargo is lost due to a shipwreck or other form of a water accident.

Freight insurance solves the problem of companies losing money because of a few unprecedented events and accidents occurring.

4. Liability Insurance: Liability insurance is a type of marine insurance where compensation is provided for any liability resulting from a ship crashing or colliding and any other induced attacks.

READ ALSO: IMPORTANCE OF INSURANCE TO INDIVIDUALS, BUSINESSES AND THE SOCIETY

Features of a marine insurance policy

A marine insurance policy usually contains the following information:

1. The name of the insured or his/her representative.

2. The name of the insuring company or its representative.

3. Subject matter of the insurance coverage, whether it is a ship, cargo, or freight. 

4. The risk or peril covered by the marine insurance policy.

5. The name of the vessel and offices.

6. Description of the voyage or period covered by the insurance contract.

7. The sum and sums issued

8. More importantly, the premium that the insured must pay.

READ ALSO: MEANING AND TYPES OF LIFE INSURANCE

Kinds of marine insurance policies

1. Voyage policy: This is a marine insurance policy which covers only one voyage.

A voyage marine insurance policy requires the insured to buy insurance protection for each new voyage.

2. Time policy: This is a marine insurance policy which is valid for a limited time, usually one year.

After the period, the insured will have to purchase new insurance coverage from the insurance company to continue enjoying marine insurance coverage.

Unlike a voyage policy which lasts for just one voyage, a time voyage may last for more than one voyage provided the voyage is completed within the timeframe specified in the time insurance policy.

3. Mixed policy: Just as its name seems to suggest, the mixed policy is a combination of both time and voyage policy.

A mixed policy offers the insured the benefit of both time and voyage policies.

4. Port risk policy: This is an insurance policy taken to protect a ship while it is docked in the port.

5. Floating policy: This is a marine insurance policy where only the claim amount is specified beforehand.

The other details are omitted till the time the ship embarks on the journey(voyage).

The floating policy is best suited for clients who frequently transport cargoes through waters.

6. Valued policy: A marine insurance policy where the value of the cargo or consignment is ascertained beforehand in the policy document is called a valued policy

A valued policy helps clear any uncertainty regarding the value of compensations if the cargo or consignment suffers a loss.

7. Wagner policy: This is a marine insurance policy without a predetermined fixed term for reimbursements.

If the insurer decides that the damages justifiably support the claim, reimbursements are made; otherwise, no reimbursement is made.

8. Open policy: This is an insurance policy where the value of the cargo or consignment is not ascertained in advance

As a result, reimbursement is only made following an inspection and valuation of the cargo or consignment that was lost.

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