The earliest type of insurance is marine insurance. It is focused on international trade that occurs via maritime routes. Also, you should know that the ship or the cargo causes marine risks. The businessman and ship owner constantly want to ensure that their cargo and ships arrive safely. If you own a storage, you should get educated on warehouse insurance.
Read along to learn more about this insurance, how it works, its importance, and so on.
What is Marine Insurance?
Marine insurance is a term used to describe a contract of indemnification. It confirms that the products shipped from the origin country to the destination country are insured. This insurance covers any loss or damage to ships, cargo, terminals, and other modes of transportation.
The phrase first appeared when people started shipping products by water. Contrary to what the name might imply, this insurance covers all forms of cargo transportation. For instance, they know the insurance as the contract of marine cargo insurance when items are carried by air.
How does Marine Insurance work?
The ideal way to transfer responsibility for the products from the parties and middlemen involved to the insurance firm is through marine insurance. The legal responsibility of the middlemen handling the goods is first restricted. Instead of being responsible for the items alone, the exporter can get maritime insurance to protect the exported goods from potential loss or damage.
The carrier of the goods may cover the expense of losses and damages to the items while on board, whether the shipping firm or the airline. However, the agreed-upon payment is typically made “per shipment” or “per consignment.” It’s possible that the coverage offered won’t be enough to pay for the cost of the shipping products. As a result, exporters prefer to send their goods after having them similarly protected by an insurance firm.
To fulfill the contractual requirements for exports, this insurance is required. The exporter must get this insurance under agreements like cost insurance and freight (CIF) or carriage and insurance paid (CIP) to honor the contract and protect the buyer’s or their bank’s interests. The seller may not be required to insure the products in the event of Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP) agreements, though, in reality, they typically do.
To avoid insurance claims and get marine insurance, ensure:
- Something should package goods with consideration for their security during loading and unloading.
- The finest feasible packing should be able to endure natural disasters.
- When packing items, keep in mind the danger of careless handling or theft.
Importance of Marine Insurance
Many import-export-trading processes require this insurance. Accepting the agreements, each party handles the payment of the insured items. There are various reasons to purchase this insurance before shipping the export cargo, albeit its issue goes beyond contractual responsibilities.
One of the following three parties must insure goods while they are in transit:
- Forwarding Agent
Also, anyone involved in the transit of goods can take it.
Types of Marine Insurance
There are types of marine insurance you should know. They include:
- Freight Insurance
- Liability Insurance
- Hull Insurance
- Marine Cargo Insurance
1. Freight Insurance
With freight insurance, for instance, the operator would lose freight receivables if the products were damaged in transit. Therefore, the insurance will be based on reimbursement for loss of freight.
2. Liability Insurance
The purchase of marine liability insurance compensates for any liability resulting from a ship colliding or crashing.
3. Hull Insurance
Hull insurance covers the hull and torso of the transportation vehicle. It protects the conveyance against damage and mishaps.
4. Marine Cargo Insurance
A marine cargo policy covers items that are shipped from their country of origin to their country of destination.
Where to get Marine Insurance?
In Nigeria, purchasing this insurance is a simple process. The geographic location of the nation enables many banks and financial organizations to offer this insurance. Read through also to learn how to process and obtain marine insurance.
The Principles of Marine Insurance
Some principles need to be considered in this insurance. They include:
1. The Principle of Good faith
Both the insurer and the assured must have complete faith, according to the parties.
2. Principle of Proximate Cause
The proximate cause is ineffective and not contemporaneous in time. However, it is a certain and significant cause of loss.
3. Principle of Insurable Interest
Any item shown as a marine risk and the assuring party handling the insurance of commodities should have legal significance. Additionally, a set of phrases known as “Incoterms” is used to formally designate who handles each party’s insurance of the goods.
4. The Principle of Indemnity
The parties’ insurance will only be effective until the loss. To make money, the parties cannot get insurance. If they do, they will only receive the loss itself.
5. Principle of Contribution
There may be over one insurer providing risk coverage for items. In these situations, they must divide the money among the insurers fairly.
What is not covered under Marine Insurance?
There are some things this insurance does not cover. They are:
- Intentional loss
- Renovation and repairs
- War and situations
- Personal insolvency
- Bad quality goods
- Delivery issues
Marine insurance covers a wide range of risks. These risks include sinking, burning at sea or standing still, becoming adrift, collisions with other ships, jettisoning, explosions, sea monsters, etc. They cause losses to the ship and its cargo, as are many other maritime dangers.