Marine Insurance

Definition

When goods are shipped to a foreign country, there is always a risk involved in that they might get damaged, destroyed, or stolen in the process of shipment from one country to another. To protect from financial losses the exporter of the good insures the goods exported.

For International shipments, the type of insurance that are generally used is known as marine insurance. To distinguish it from “inland marine insurance, “it is sometimes referred to as the” ocean marine insurance”.

Basically marine insurance is a contract between exporter and insurance, where the exporter pays a certain amount of premium to get back the amount insured in case the goods get damaged or pirated in the sea. Thus marine insurance minimizes the risk involved in shipment either due to natural calamity or due to man made factors. However, marine insurance cannot prevent accidental losses, but can provide reimbursement for financial losses in case the exporter’s shipment somehow fails to reach the destination.

Need of marine insurance

Since the cost of marine insurance is much lower as compared to the cost of the goods exported and the freight charges, it is always advisable to go for marine insurance to protect your goods from natural calamities and get financial reimbursement for the amount insured. Moreover one should not entirely depend on the shipping company to take care of the goods because in case of natural calamity it is even beyond their reach to protect your goods.

Responsibility of Insurance

The responsibility of making insurance always rests on the exporter. It is he who would decide whether he will minimize his financial losses arising out of unavoidable circumstances or not. There are basically three types of marine insurance:

1. Ship insurance

2. Cargo insurance

3. freight insurance

Ship insurance is not the responsibility of the exporter. It is the responsibility of the shipping company. However, Cargo insurance and freight insurance is the responsibility of the exporter. Cargo insurance normally covers the risk arising out of an act of god, enemy action, fire etc taken by the exporter of goods while freight insurance covers the risk involved if the ship is lost on account of any of the marine perils or in other words if the cargo is lost.