Meaning of Marine Insurance
Marine insurance may be defined as a contract between the insured and the insurer to indemnify the loss caused due to accidental marine adventure. Moreover, it is an attempt to minimize the loss caused due to the perils of the sea in the course of the sea voyage.
According to the Indian marine insurance act,” Marine insurance is a contract whereby the insurer undertakes to indemnify the insured in a manner to the extent thereby agreed upon the loss caused by marine adventure.”
According to Arnold,” A contract whereby one party for an agreed consideration undertakes to indemnify the other against loss arising from certain perils and sea risk to which a shipment maybe expose during a certain voyage or certain period.”
Marine insurance is the oldest form of insurance which has helped in the development of other types of insurance i.e. fire and life insurance. The waterway is supposed to be the most traditional form of transportation through which people used to cover long distances. Thus, the risk of the sea journey is covered by marine insurance. It covers different types of risks such as the sinking of the ship, burning of the ship or sea rock damage caused due to storms, sea pirates…..etc are covered under marine insurance.
Types/kinds/subject matter of marine insurance:
Marine insurance is taken- up for covering the risk while traveling nationally or internationally over the sea. Generally, in marine insurance there can be three parties involves i.e. ship owner, shipper and the shipping company based on the subject matter of marine insurance also can be three types i.e.
A) Hull insurance
Hull means the body of the ship thus; hull insurance refers to the insurance of the whole ship. This means the whole ship it parts, engine and machines etc are insured against the risk of sea transportation. It is the shipowner who takes hull insurance to protect his ship from damage caused due to sinking burning piracy…etc hull insurance can be taken for a particular journey or for a particular time.
B) Cargo insurance
The goods i.e. transported through the ship is cargo. Cargo insurance is done by the shipper i.e. the owner of the cargo. When a person take-up insurance for goods carried by ship it is cargo insurance. Here, the compensation is only payable if the goods get damaged during the sea voyage only.
C) Freight insurance
The amount payable by the cargo owner to the shipping company for transporting the cargo is freight. The freight is only receivable when the cargo reaches the destination by safety. Thus when the insurance is taken against the freight charge receivable from the shippers is freight insurance.
Risk covered by marine insurance
Marine insurance is taken-up by the insured for covering different types of risk caused due to sea the following are the risk covered by marine insurance:
A) Perils of sea
The danger of meeting an accident by sea is called the perils of the sea. A ship may be damaged due to collision with sea rock, with another ship or due to storms wave and sea tides all these causes damage to the ship and all these risks are covered under perils of the sea.
B) Perils of fire
It refers to the risk caused by the fire which can occur due to explosion, electrical short circuit or burning coal. It includes both damage to the ship and the damage of cargo. Damage which is caused by smoke and ordure is also covered under perils of fire.
Jettison means voluntary throwing of cargo by the crew member for saving the ship from sinking or burning. Sometimes overload of cargo causes the risk of sinking due to sea waves. It is an international act that causes a loss for the purpose of general safety.
It refers to the activities such as theft, setting fire to the ship by the captain or another crew member. Sometimes the cargo is thrown intentionally into the sea in order to embarrass the shipowner. This is one way of cheating to make the shipowner suffer heavy loss as a means of revenge this kind of risk is included under barratry.
E) Other perils
This covers the risk of damage caused by sea pirates and robbers. Sometimes during the war, even the enemy country can cause damage to the ship and the cargo which can be covered under other perils.
Types of marine insurance policy
Insurance companies provide different types of marine insurance policies to their customers depending upon their needs and the nature of insurance. Some of the major types of insurance policies are:
A) Valued policy
This policy is based on the agreement made upon the value of subject matter at the time of taking insurance. The value of subject matter may be either equal to its actual cost or less than actual cost depending upon agreement however the insured cannot determine the value of subject matter more than its actual cost. The amount of premium to be paid depends upon the value of the ship, cargo, and freight as agreed upon by the insured and the insurer.
B) Unvalued policy
Under this policy the value of the subject matter is not determined at the time of taking insurance only limitation of the price is fixed. Here the value is left to be decided at the time of loss. The value decided later is called insurable value and it is the basis for indemnification after the loss occurs. It consists of the market value of the subject matter at the time of paying compensation.
C) Voyage policy
The term voyage means a journey through the ship. Thus when insurance is done from one destination to another i.e. from the point of origin to the point of destination it is voyage policy. Under this policy, the time factor or date isn’t considered. The only place of a voyage like from where to where is considered important. Thus, the voyage policy is suitable for cargo insurance.
D) Time policy
Time policy is taken for a specific period of time. When the insured takes the insurance by stating the time of insurance such as 1-1-2020 to 31-12-2020 it is time insurance. Time insurance is generally taken for a period of 1 year. This type of policy is most suitable for hull insurance.
E) Mixed policy
A kind of marine insurance policy that has both the feature of the voyage and time policy is a mixed policy. Under the mixed policy, both times, as well as destination, is fixed for e.g. a policy taken from 1-1-2020 to 31-12-2020 and sailing from Singapore to Kolkata port is mixed policy. The mixed policy is suitable for those ships which sail in a fixed route.
F) Block policy
This is the most comprehensive type of insurance policy that covers all types of risk of transportation when goods are transported through various means of transportation like sea, land, air until the cargo reaches its final destination. Thus, this policy is also called a warehouse to warehouse policy.
G) Floating policy
The floating policy is taken for a specific period and it covers each risk of all shipments during that period. The insured here just has to inform the insurer about the shipment of goods and the name of the ship since here the insured has to declare the shipment of goods and name of the ship. It is also called a declaration policy. It has a double advantage as it is not necessary to take insurance every time and it has a low rate of the premium too.
H) Blanket policy
Under this policy, the maximum value of the subject matter is estimated in advance and the premium payment is done accordingly at the beginning. Later on, the amount of premium is adjusted according to its actual value. If premium payment is more it is refunded back to the insured and if the payment of premium is less then additional premium Is charged from the insured.