Marine insurance is a type of insurance that protects ships and the cargo they carry. The industry is highly risky with damage to ships and lost goods occurring in the blink of an eye, making marine insurance essential for anyone in the business of shipping. While buying car insurance is often as simple as filling out an application and talking to a perky woman named Flo, marine insurance can be more complicated. This is because marine insurance is steeped in tradition and old English words that can be confusing for people not familiar with the maritime world.
The Different Types of Marine Insurance
There are three primary types of marine insurance: hull, cargo and liability. Each type of marine policy provides a different level of protection depending on the specific needs of your company or organization.
Hull insurance provides coverage for the physical damage to a ship and its machinery. This includes covering the cost to repair or replace a vessel if it is lost, wrecked, or severely damaged. It also provides cover for the value of the ship, which is typically stated in the policy and forms the limit on how much a claim can be paid.
Some hull policies are limited in scope and will only provide coverage for specific perils. For example, a “named perils” policy will include the following language in its terms of insurance: “Touching upon all adventures and perils which this Company is contented to bear and take upon itself, such as, but not limited to, storms, pirates, robbery, fires, jettisons, loss or damage to the vessels or their cargo, the negligence of the master or crew, and all other like perils, losses, and misfortunes.”
Cargo insurance is designed to cover the physical damage caused to the cargo shipped on a vessel. This can be the result of handling at a port or during the voyage. It may also be the result of a collision with another ship or natural disaster. Marine cargo insurance can protect you against the loss or damage to your products, raw materials, or equipment that could happen during transit.
Liability insurance is a vital part of any marine insurance policy. This coverage helps to protect the insured against claims for bodily injury or property damage suffered by third parties as a result of the ownership, maintenance and use of vessels covered under the policy.
It is possible to purchase a marine policy for a specific ship or as an open policy that will cover all ships of a certain type and size that sail on specified routes. Choosing an open marine insurance policy will save you time and effort as you do not need to buy new coverage each time you send out a shipment.
Unlike other types of insurance, marine insurance is generally administered by a mutual or syndicate. These organizations will levy an initial call (premium) and then, once enough funds have been collected, they will purchase reinsurance. This will allow them to offer a low premium for marine insurance.