Exploring the Types of Marine Insurance Policy in India

There are different types of Marine insurance varying according to the frequency of transit, the nature of the goods, the coverage limit desired, the geographical limits of the transit, the type of coverage desired and the items insured. Let’s explore more on the marine insurance types here.

What is Marine Insurance?

Marine insurance is a business insurance policy that provides for any damages or losses caused to the goods during transit when traveling from the source to the destination port. This also consists of any damages or losses caused to the transportation vehicle. The marine transit insurance policy is not just limited to transit through the sea but also extends to other modes - roadways, airways, and railways. The marine insurance coverage varies according to the requirements of the customers based on the nature of goods and risk exposure amid the transportation of goods.

Different types of Marine Insurance Policy

The types of marine insurance policy are categorized in different ways based on coverage requirements (goods, transportation vehicle, etc), location of ports during transit (whether native or foreign) and frequency of transit (Single or multiple), and also time duration for coverage required.

Let’s explore different kinds of marine insurance and their sub-type based on all the above factors.

Hull Insurance

Hull insurance is a type of marine insurance that provides cover for any damages or losses caused to the transportation vehicle’s hull and machinery due to any unexpected event such as an accident, theft, or other such emergency. The policy is ideal for individuals having ‘insured interest’ in the transportation vehicle which includes shipowners, mortgagees, and other such individuals involved in trade business.

The comprehensive policy provides coverage for all transportation vehicles, but, for waterways, hull insurance includes boats, ships, yachts, bulk carriers, trawlers, jetties, cruise tankers, etc. The hull insurance policy could be total loss only (TLO) or cover all potential risks ranging from cover for total loss or partial loss/damage of the transportation vehicle.

Freight Insurance

Freight insurance is one of the different kinds of marine insurance to protect against any damages caused to the freight or cargo in transit. The party bearing the risk of losses/damages of cargo requires freight insurance, varying from the shipowner to the party sending or receiving consignment. This could be either for single transit or multiple transits, as per the requirements of the insured or shipowner.

Liability Insurance

Liability insurance as a type of marine insurance offers coverage for any legal liability arising due to any damages caused to third-party physical injury or asset as a result of negligence of the insured or the agent during transit operations. It is suitable for shipowners, ship or transport vehicle operators and managers, charterers, and any specific individual involved in the transit activities.

Here are some types of marine liability insurance as follows:

• Protection & Indemnity (P & I) Insurance: When the shipowner has to deal with the legal liability arising due to physical injury, disease, or ailment of a third party or damages or losses caused to the assets or property of an external party, P & I Insurance provides the required cover. Ex: A shipowner’s vessel spills heavy chemicals into the sea during maritime activities causing severe harm to the marine environment. The shipowner can initiate clean-up by raising a claim.
• Charterer’s marine liability insurance: When the charterer is negligent or breaches any contract which causes damages or loss of the vessel, cargo, or any damages to a third party. Ex: A charterer causing damage to a rented vessel by unloading goods in an improper way can claim under this policy.
• Ship Repairer’s Liability Insurance: The policy provides coverage to the ship repairer for any damages caused to the hull or equipment during custody. Ex: A ship repairer damaged the engine during regular maintenance activities can claim under the ship repairer’s liability policy to compensate for repairs.

Cargo Insurance:

Also known as Marine Cargo Insurance, this policy provides coverage for any damages caused to the goods or merchandise in transit via sea due to any unexpected emergency. The cargo insurance is best used by parties with ‘insured interest’ in the goods which includes importers, exporters, or the buyers and sellers of goods. There are different types of cargo insurance based on the frequency of transit, location of source and destination for transit of goods, and bundling of different policies together for comprehensive protection of goods and transportation vehicles.

Open Policy:

This type of marine cargo insurance offers protection of goods in transit continuously for different shipments for the duration of one year. This is a suitable plan for businesses involved in regular trade and shipment of goods as the coverage extends to all kinds of goods for several trips in the specific time limit of one year, making it more convenient and cost-effective to insure every single shipment under Single Transit Insurance.

Specific Policy or Single Transit:

As the name suggests, Single Transit marine insurance offers coverage for goods only for a single shipment of goods from source to location. This is ideal for businesses that are not specifically into shipment but have occasional requirements based on the client’s location. The policy covers cargo during transit through a vessel through different modes of transport such as roadways, railways, and airways.

Annual Sales Turn Over Policy:

The annual sales turnover policy is a type of marine insurance policy that offers cover for the anticipated sales turnover of a business involved in the marine transit of goods. This policy provides financial protection to the company in case of any damage or losses during marine operations. For instance, if a company has a business goal to export goods worth ₹ 10 crore and import goods worth ₹ 5 crore, they can select a STOP policy for securing goods in transit. The insurer will determine the premium based on the projected turnover of ₹ 10 crore, but the policyholder receives coverage for ₹ 10 crore export of goods as well as ₹ 5 crore import of goods, accounting for ₹ 15 crore total loss or damage incurred.

Other types of Marine Insurance

Beyond the 4 types of marine insurance policies discussed, there are some specific types based on certain business requirements and situational specifications. These can be discussed here as follows:

Floating Policy:

The floating policy in marine insurance offers protection of cargo for multiple shipments without any specifications for a single journey for transit of goods under the single policy during the onset of insurance. The insured should declare all the required details for each shipment amid the tenure of the policy. The floating policy is suitable for businesses engaged in recurrent shipment or transit of goods as this is affordable and convenient as compared to buying marine insurance for every single shipment of the goods.

Voyage Policy:

This offers coverage for the shipment of goods for a specific journey or shipment from the source port to the destination port. The voyage policy in marine insurance is valid only till the shipment of goods is completed. The policy provides coverage for cargo, or hull (vessel), or both based on the voyage requirements. This is ideal for businesses that require occasional shipping or businesses would need to put additional effort into buying an insurance cover for every shipment as and when required.

Single vessel policy:

This type of marine insurance only offers coverage for the vessel carrying the goods in transit owned by the policyholder. The single vessel policy covers any damages or losses incurred to the vessel for different conditions as documented in the policy. This covers both the hull and cargo or both.

Fleet Policy:

The fleet policy is a type of marine insurance policy that offers coverage for more than one vessel owned by the policyholder under a single insurance policy. The policy offers coverage for all the different vessels leveraged in the shipment of goods from different conditions that can damage the vessel. This policy also provides coverage for both the hull and cargo.

Time policy:

The time policy offers coverage for goods in transit for a specific period of time, typically, a period of 1 year. The time policy provides protection for all the shipments led by the vessels owned by the policyholder during the tenure of the policy. This can also cover hull, cargo, or both.

Blanket Policy:

The blanket policy in marine insurance provides cover for all shipments under a single policy without any particular specifications for each consignment. For this policy, the premium price is calculated considering a rough count of all the shipments for the specific tenure of the policy. The blanket policy is ideal for businesses engaging with frequent import or export of goods with variable quantities of goods.

Types of Marine Insurance as per geographical limit

• Inland: Inland marine insurance policy offers protection of goods when transported from one port to another within Indian borders. The inland policy majorly covers goods during transit through railways and roadways.
• Import: This type of marine insurance policy is curated for the protection of goods during import from a foreign country to Indian ports. The two modes of transport under import policy are airways and waterways.
• Export: With an export marine insurance policy, all the goods exported from India to different foreign destinations can be easily secured. The key modes of transport are similar to import policy, which includes airways and waterways.

How to Choose the Best Marine Insurance Coverage?

When selecting marine insurance policy from different insurers, it is important to consider certain factors discussed as follows:

Analyze coverage needs:

Review the different items which are supposed to be insured that includes coverage for a vessel, type of goods shipped, and the number of shipments led by the business in a given specific period of time. The net sales turnover through the export or import of goods also defines the policy premium and coverage requirements.

Review policy details:

When buying a marine insurance policy, it is important to understand the inclusions and exclusions, coverage limits, and different terms and conditions which vary according to different insurers. Select the cover plan that best aligns with the business requirements and have clarity on the exclusions.

Cost-benefit analysis of premium vs coverage:

The best marine insurance policy can be estimated through a cost-benefit analysis of the policy premium and whether it provides the desired coverage limit, required inclusions, and clarity about exclusions.

Insurer’s reputation:

The insurer’s reputation is one of the primary factors for buying a policy, which can be analyzed with the prior claims history, customer testimonials, and claims settlement ratio (CSR). The higher the CSR, the higher the probability of the processing of policy claims. Scour through the quality of customer service in customer reviews to understand whether the insurer is customer-centric or not.

Customized policy with add-ons:

The best marine insurance coverage is the one customized to the unique requirements of the business. Furthermore, review the add-ons for marine insurance and the additional premium to be paid for the specific desired coverage requirements.

Conclusion

Marine insurance is a type of insurance policy that offers protection for the consignment of goods shipping from the source port to the destination port within Indian borders or foreign countries. This includes different modes of transportation – roadways, railways, airways, and waterways. There are different types of marine insurance policies based on the requirements of the business owners and the situational specifications. The coverage could be for a hull or vessel or both and could be for a specific voyage or all the shipments during a particular time period. The blanket policy in marine insurance is ideal for businesses with frequent import or export of goods with a policy tenure of a year covering all the shipments for a year. To learn more about the coverage and exclusions of marine insurance, click here.