The risks faced by a marine transport business are uncountable. From damaged ship vessels to asset damage or bodily injury to the parties, all these situations are hard to avoid in transit.
For this reason, marine insurance policies are bought in advance by ship owners, cargo owners, transporters, and shippers.
This type of policy brings several benefits to the policyholders and saves them from facing substantial financial losses when marine transit does not go as planned.
But what is marine insurance, what are the functions of marine insurance and does it cover cargo in it? Let us know.
What Comes under a Marine Insurance Policy?
A marine insurance policy helps protect the cargo and the shipping vessel from uncertain events such as theft, fire, collision, ship wreckage and natural disasters (i.e., hurricane or storm).
The major subsets of ocean marine insurance policy are:
- Cargo Insurance: Cargo insurance mainly covers risks only related to goods. The duration of marine cargo insurance coverage usually starts with the cargo’s departure and ends with its arrival at the destination.
- Hull Insurance: Hull insurance provides coverage in case the ship or its equipment/machinery gets damaged by natural forces, collision, or piracy.
What Role Does Marine Cargo Insurance Play in Cargo Damage?
As already mentioned, marine cargo insurance is a type of marine insurance that provides financial help to the policyholder in case anything happens to the cargo, i.e. loss or damage.
Let’s discuss the functions of marine cargo insurance in detail:
Caters the Need of Every Cargo Owner
Regardless of the type of cargo, its value, or the destination, most marine cargo insurance policies provide financial coverage to the policyholder.
Plus, this insurance policy can be easily tailored to the customer’s requirements to ensure maximum protection against damage to cargo.
Covers Different Cargo Related Risks
There are several situations that are covered by a marine cargo insurance policy. A few of them are listed below:
- Theft
- Storms
- Lightning
- Earthquakes
- Fire
- Piracy and other unforeseen events
In short, the cargo owner remains shielded against risks that can result in substantial monetary losses.
Determination of Premium
Just like any other insurance, the policyholder pays a predetermined premium to the insurer. This premium is calculated according to the coverage provided, the value of the cargo, and the level of risk to the cargo. For example, hazardous cargo can cause significant damage to the ship, so the premium charged will be higher.
Raise a Claim and Get Compensation
In case the cargo gets damaged or lost during transportation, the policyholder is eligible to file a claim and demand compensation for the loss incurred. This is the best part of buying a marine cargo policy, as it helps restricting the financial loss.
Some Benefits of Buying Marine Cargo Insurance
Financial Protection in Case of Cargo Loss and Damage
A marine accident cannot always be prevented, but the financial burden associated with it can be tackled with the help of marine cargo insurance.
This is because the cargo will be covered under the policy, which means you will be compensated for the expenses paid for recovering the loss incurred.
Improved Reputation
With marine insurance in place, your company gains a better reputation. This will attract more clients as they will feel confident that their cargo is safe with your services.
Complying with the Laws
Having marine insurance is not compulsory for domestic transit. However, it may be mandatory to have adequate marine insurance when transporting goods to some other nations.
Smooth Claim Process
Filing a claim to receive reimbursement to recover the cost of damaged/lost cargo is very simple. All you need to do is provide the insurer with detailed documentation so that they can examine the details of the event and start processing the claim.
Who Should Opt for a Marine Cargo Insurance Policy?
- Small shipping companies and transporters—Marine cargo insurance is especially beneficial for small companies that lack sufficient resources to face big losses.
This type of insurance plan will help these companies reduce their expenses in case of cargo damage or loss.
- Large companies—This insurance is equally essential for these types of companies as their risk exposure is more significant. Having marine cargo insurance means having a financial backup that will help you pay a portion of the losses incurred.
Conclusion
Marine cargo insurance is one of the best risk mitigation tools you can get against cargo loss or damage. By offering financial protection against potential risks, marine cargo insurance coverage not only safeguards the financial concerns of parties involved in case of damage but also helps in the smooth and secure operation of international trading activities.
FAQs
- How to choose the right marine insurance policy?
Choose a policy that suits your needs, provides flexible coverage, can be customised, has a simple claim filing process and has a premium that justifies the coverage offered.
- Does marine Insurance provide liability protection?
Yes, along with cargo and hull insurance, a marine insurance policy also offers liability cover, for which you can raise a claim in case of a ship collision and crash.
