Types and Policies of Marine Insurance
Subject: Business Studies
Overview
Marine insurance is a safe haven for shipping corporations and transporters because it helps to reduce the aspect of financial loss due to the loss of important cargo. There are also various types of marine insurance policies that are offered to the clients by insurance companies so as to provide the clients with flexibility while choosing a marine insurance policy. Depending on the nature and scope of a client’s business, the owner can make the best marine insurance plan and enjoy the advantage of having marine insurance.
Types and Policies of Marine Insurance
Marine insurance is such insurance that provides compensation of losses on the hull, cargo, passenger and third party liabilities due to marine risks. There is a definite categorization of various types of marine insurance and different types of marine insurance policies according to the needs, requirements, and specifications of the transporter.
Different types of Marine Insurance are as follows:
- Hull Insurance:
Hull insurance is the insurance against loss caused by damage or destruction of waterborne craft or aircraft to the owner. It is the insurance of the ship which includes all the articles and pieces of furniture in the ship. Hull and machinery insurance can be done to protect the shipowner and investment in the ship. If the ship is damaged, the owner of the ship gets indemnity from the insurance company. This type of marine insurance is usually, taken out by the owner of the ship in order to avoid any loss of the ship in case of any mishaps occurring. - Cargo Insurance:
The goods sent through the waterway are known as cargo. Cargo insurance is also called marine cargo insurance. It covers physical damage or loss of your goods while in transit by land, sea, and air. It also offers considerable opportunities and cost advantages if managed correctly. It is insured by the owner and insurance of goods shipped through waterways is known as cargo insurance. If the cargo is ruined, the owner gets the indemnity from the insurance company. - Marine Liability Insurance:
Liability insurance is that type of marine insurance where compensation is bought to provide any liability occurring on account of a ship crashing or colliding. In the course of the marine adventure, one ship may collide with another ship. The goods of another ship may lose. Marine insurance provides the compensation of such liabilities nowadays if insurance has made insurance of such liabilities. A crew member traveling with expensive items, such as laptop computers, gold watches, etc. should make sure that he has such items separately insured. - Freight Insurance:
To transfer the goods from one port to another, the amount paid to the owner of the ship is called freight. The payment of such freight can be made in two ways: either in advance or after the ship reaches its destination safely. Freight insurance offers and provides protection to merchant vessels’ corporations. It stands for the chance of losing money in the form of freight, in case the cargo is lost due to the ship meeting in an accident. This type of marine insurance solves the problem of companies losing money because of a few unprecedented events and accidents occurring. (MARINE INSIGHT)
Different Types of Marine Insurance Policies
- Voyage Policy:
This policy gives more importance to the voyage. A voyage policy is that kind of marine insurance policy that is valid for a particular voyage. It covers the risk from the port of departure up to the port of destination. This type of policy is considered more useful for cargo. The insurance company should give indemnity for loss/ damage of any property of the insured during the period of the voyage. The liability of the insurer continues during the landing and re-shipping of the goods. The policy ends when the ship reaches the port of arrival. This type of policy is purchased generally for cargo. Under this policy "from" and " to" has great importance. - Time Policy:
The policy which is issued for a fixed period of time is known as time policy. A marine insurance policy is valid for a specified time period generally valid for a year. All the marine perils during that period are insured. This type of policy is suitable for full insurance. The policy is generally taken for one year although it may be for less than one year. But there is no restriction to make this type of policy for less than one year. This policy is more commonly used for hull insurance than for cargo insurance. The ship is insured for a fixed period irrespective of voyages. The policy is generally issued for one year. For example, a period of time from 12 March 2015 to 11th December 2015. This policy is effective for this period. - Mixed Policy:
The joint form of voyage policy and time policy is called a mixed policy. In this policy, the elements of voyage policy and of time policy are combined. The reference is made a certain period after completion of the voyage. The meaning of the mixed policy is that a new policy takes birth from the combination of the fundamental things of time and the place policy. Generally, this policy is used for ship insurance. For example, a mixed policy is a policy that states the ship should reach from 1st December 2015, from Paris to October 2015 in New York. Policy expires whichever is met first. - Open or Un-valued Policy:
In this type of marine insurance policy, the value of the cargo and consignment is not put down in the policy beforehand. The value thus left to be decided later on is called the unvalued or open policy. The insurable value of the policy includes the price of the insured's property, investment price, incidental expenditure, and all the expenditure as well. The unvalued policy is not used in practice so much. This policy is used only in freight insurance. - Valued Policy
The opposite of an open marine insurance policy is a valued policy. In this type of policy, the value of the cargo and consignment is ascertained and mentioned in the policy document beforehand, thus, making clear about the value of the reimbursements in case of any loss to the cargo and consignment. Under this policy, the value of the policy is decided at the time of the contract. Generally, the insured amount in this type of policy includes the price of cargo, ship, freight and approximate profit. Thus the value which is mentioned in the policy is the insured amount. - Port Risk Policy:
The Port Risk Policy is taken out in order to ensure the safety of the ship while it is stationed in a port. It covers the risks when a ship is anchored in a port. It is an ocean marine insurance designed to protect a vessel that is portside for a long period of time. Coverage terminates as soon as the vessel leaves port. - Wage Policy:
Wage policy is one where there are no fixed terms of reimbursements mentioned. This is a policy held by a person who does not have an insurable interest in the insured subject. He simply bets or gambles with the underwriter. The policy is not enforced by law. - Floating Policy:
The floating policy is also called a declaration policy. This policy is useful for the merchant who delivers cargo regularly. When a person ships goods regularly in a particular geographical area, he will have to purchase a marine policy every time. It involves a lot of time and formalities. He purchases a policy for a lump sum amount without mentioning the value of goods and the name of the ship, etc. It is the agreement between the insurer and insured that the insured declares a number of goods on the basis of shipment documents. - Named Policy
The policy which is issued by mentioning the name of the ship and price of the cargo is called named policy. This type of policy has been receiving popularity in marine insurance. - Block Policy
It is the policy that takes the risk in the block that is from sea route and land route. It does not only protect from the risk of the marine route but also covers the risk that occurred on the land too. It takes the risk of transportation from the place of the seller to the place of the buyer. It is a very useful policy for landlocked countries. (Agrawal)
Bibliography
MARINE INSIGHT. 8 12 2010. Electronic. 16 06 2016.http://www.marineinsight.com/maritime-law/different-types-of-marine-insurance-marine-insurance-policies/
Agrawal, RC. your article library.com. Since 1998. Electronic. 16 06 2016.http://www.yourarticlelibrary.com/insurance/11-kinds-of-marine-insurance-policies/42115/
Things to remember
- There is a definite categorization of various types of marine insurance and different types of marine insurance policies.
- Cargo insurance caters specifically to the cargo of the ship and also pertains to the belongings of a ship’s voyages.
- Freight Insurance solves the problem of companies losing money because of a few unprecedented events and accidents occurring.
- A voyage policy is that kind of marine insurance policy that is valid for a particular voyage.
- A marine insurance policy that is valid for a specified time period – generally valid for a year – is classified as a time policy.
- Mixed Policy is a mixture of time and voyage policies.
- A valued marine insurance policy is the opposite of an open marine insurance policy.
- It includes every relationship which established among the people.
- There can be more than one community in a society. Community smaller than society.
- It is a network of social relationships which cannot see or touched.
- common interests and common objectives are not necessary for society.
Questions and Answers
What are the types of marine insurance?
a) Hull Insurance:
Hull insurance is the insurance against loss by the sea transportation. It is the insurance of the ship which includes all the articles and pieces of furniture in the ship. Hull means the full body and machinery of the ship or vessel. If the ship is damaged, the owner of the ship gets indemnity from the insurance company. The ship owner takes a hull insurance to cover the loss or damage to the ship. It may be for any particular journey or for a particular period of time.
b) Cargo Insurance:
The goods sent through waterway is known as cargo. Cargo insurance is also called marine cargo insurance. The owner of the cargo takes a cargo insurance to cover the loss of cargo during the journey. The cargo on the ship is exposed to risks arising from an act of god or enemy, fire, and other perils of the sea. If the cargo is ruined, the owner gets the indemnity from the insurance company.
c) Marine Liability Insurance:
Liability here means compensating the loss of other parties due to our reason. The marine insurance includes liability hazards such as collision or running down. Marine insurance provides the compensation of such liabilities nowadays if insurance has made insurance of such liabilities. A crew member travelling with expensive items, such as laptop computers, gold watches etc. should make sure that he has such items separately insured.
d) Freight Insurance:
The charge receivable by a ship for transporting the cargo is called freight. Sometimes shipping freight is payable on the destination. In such a case, the shipping company may not receive the freight if the goods do not reach the destination. Thus, freight insurance policy provides protection against such loss of freight due to sea risks.
What are the different types of marine insurance policy?
1. Voyage Policy:
This policy gives more importance to the voyage. A voyage policy is issued for a particular voyage from one port to another port or from one place to another. It covers all marine risks involved in a particular sea voyage irrespective of the time taken to accomplish the voyage. The insurance company pays the compensation if the insured property is damaged in the ship while traveling from one port to another. In this policy, the insurance company is free from responsibility when the ship arrives at its destination.
2. Time Policy:
This policy covers the marine risks for a specified period of time not exceeding 12 months. However, it may also be used for a period less than one year. Any loss that occurs during this period is indemnified to the insured. But there is no restriction to make this type of policy for less than one year. This policy is commonly more used for hull insurance than for the cargo insurance. For example, a period of time from 12 march 2015 to 11th December 2015. This policy is effective for this period.
3. Mixed Policy:
The mixed policy is a combination of both time and voyage policies. This policy covers the marine risk of a particular voyage up to a particular point of time. In this policy, the elements of voyage policy and of time policy are combined in under this policy. The insurance company is responsible for both traveling and also for a certain duration. It is more useful for insuring the cargo. For example, the mixed policy is the policy which states the ship should reach from 1st December 2015, from Paris to October 2015 in New york. Policy expires whichever is met first.
4. Open or Un-valued Policy:
A marine insurance policy in which the value of the property is fixed at the time of inspection is called un-valued policy. So, in the case of property, the insurance company pays the full of policy amount paid at the time of taking policy whether the property is fully damaged or not. The insurable value of the policy includes the price of the insured's property, investment price, incidental expenditure and all the expenditure as well. The un-valued policy is not used in practice so much. This policy is used only in freight insurance.
5. Valued Policy
In this type of policy, the value of the cargo and consignment is ascertained and mentioned in the policy document beforehand. Under this policy, the value of the policy is decided at the time of contract. Generally, the insured amount in this type of policy includes the price of cargo, ship, freight and approximate profit. Thus the value which is mentioned in the policy is the insured amount.
6. Port Risk Policy:
The Port Risk Policy is taken out in order to ensure the safety of the ship while it is stationed in a port. It covers the risks when a ship is anchored in a port. It is an ocean marine insurance designed to protect a vessel that is portside for a long period of time. Coverage terminates as soon as the vessel leaves port.
7. Wage Policy:
A wage policy is one where there are no fixed terms of reimbursements mentioned. If the insurance company finds the damages worth the claim then the reimbursements. This is a policy held by a person who does not have any insurable interest in the insured subject.He simply bets or gambles with the underwriter. The policy is not enforced by law.
8. Floating Policy:
The floating policy is also called declaration policy. A floating policy is issued to cover many shipments from one port to another for a specific value and for a definite time period under a single policy. In another words, a policy is taken for a large sum which covers several shipments of goods is called floating policy. It is the agreement between the insurer and insured that the insured declares a number of goods on the basis of shipment documents.
9. Named Policy
When the name and registration number of a particular ship and the quality of each types of goods on board are clearly written in the contract, it is called named policy. Ia any loss occurs to the goods on board as specified in the policy, the insurance company is liable to indemnify for the loss, otherwise the insurance company is free from its liability.
10. Block Policy
It is the policy which takes the risk in the block that is from sea route and land route. It does not only protect from the risk of the marine route but also covers the risk occurred on the land too. It is very useful policy to the landlocked countries.
Explain any five types of marine insurance policy.
Any five marine insurance policy are as follows:
1. Voyage Policy:
This policy gives more importance to the voyage. A voyage policy is issued for a particular voyage from one port to another port or from one place to another. It covers all marine risks involved in a particular sea voyage irrespective of the time taken to accomplish the voyage. The insurance company pays the compensation if the insured property is damaged in the ship while traveling from one port to another. In this policy, the insurance company is free from responsibility when the ship arrives at its destination.
2. Time Policy:
This policy covers the marine risks for a specified period of time not exceeding 12 months. However, it may also be used for a period less than one year. Any loss that occurs during this period is indemnified to the insured. But there is no restriction to make this type of policy for less than one year. This policy is commonly more used for hull insurance than for the cargo insurance. For example, a period of time from 12 march 2015 to 11th December 2015. This policy is effective for this period.
3. Mixed Policy:
The mixed policy is a combination of both time and voyage policies. This policy covers the marine risk of a particular voyage up to a particular point of time. In this policy, the elements of voyage policy and of time policy are combined in under this policy. The insurance company is responsible for both traveling and also for a certain duration. It is more useful for insuring the cargo. For example, the mixed policy is the policy which states the ship should reach from 1st December 2015, from Paris to October 2015 in New york. Policy expires whichever is met first.
4. Open or Un-valued Policy:
A marine insurance policy in which the value of the property is fixed at the time of inspection is called un-valued policy. So, in the case of property, the insurance company pays the full of policy amount paid at the time of taking policy whether the property is fully damaged or not. The insurable value of the policy includes the price of the insured's property, investment price, incidental expenditure and all the expenditure as well. The un-valued policy is not used in practice so much. This policy is used only in freight insurance.
5. Valued Policy
In this type of policy, the value of the cargo and consignment is ascertained and mentioned in the policy document beforehand. Under this policy, the value of the policy is decided at the time of contract. Generally, the insured amount in this type of policy includes the price of cargo, ship, freight and approximate profit. Thus the value which is mentioned in the policy is the insured amount.
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