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Marine Insurance

A contract of marine insurance is an agreement whereby the insurer covers against losses incidental to marine adventure.

There is a marine adventure when any insurable property is exposed to maritime perils i.e. perils consequent to navigation of the sea. The term 'perils of the sea' refers only to accidents or casualities of the sea, and does not include the ordinary action of the winds and waves. Besides, maritime perils include, fire, warperils, pirates, seizures and jettison, etc.

There are Four Types of Marine Insurance
  • Hull Insurance - covers the insurance of the vessel and its equipment i.e. furniture and fittings, machinery, tools, fuel, etc. It is effected generally by the owner of the ship.
  • Cargo Insurance - includes the cargo or goods contained in the ship and the personal belongings of the crew and passengers.
  • Freight Insurance - provides protection against the loss of freight. In many cases, the owner of goods is bound to pay freight, under the terms of the contract, only when the goods are safely delivered at the port of destination. If the ship is lost on the way or the cargo is damaged or stolen, the shipping company loses the freight. Freight insurance is taken to guard against such risk.
  • Liability Insurance - is one in which the insurer undertakes to indemnify against the loss which the insured may suffer on account of liability to a third party caused by collision of the ship and other similar hazards.

In a contract of marine insurance, the insured must have insurable interest in the subject matter insured at the time of the loss. Insurable interest is not required to be present at the time of taking the policy. Under marine insurance, the following persons are deemed to have insurable interest :

  • The owner of the ship has an insurable interest in the ship.
  • The owner of the cargo has insurable interest in the cargo.
  • A creditor who has advanced money on the security of the ship or cargo has insurable interest to the extent of his loan.
  • The master and crew of the ship have insurable interest in respect of their wages.
  • If the subject matter of insurance is mortgaged, the mortgagor has insurable interest in the full value thereof, and the mortgagee has insurable interest in respect of any sum due to him.
  • A trustee holding any property in trust has insurable interest in such property.
  • In case of advance freight the person advancing the freight has an insurable interest in so far as such freight is repayable in case of loss.
  • The insured has an insurable interest in the charges of any insurance policy which he may take.
Types of Marine Insurance Policies
  • Voyage Policy - is a policy in which the subject matter is insured for a particular voyage irrespective of the time involved in it. In this case the risk attaches only when the ship starts on the voyage.
  • Time Policy - is a policy in which the subject matter is insured for a definite period of time. The ship may pursue any course it likes, the policy would cover all the risks from perils of the sea for the stated period of time. A time policy cannot be for a period exceeding one year, but it may contain a 'continuation clause'. The 'continuation clause' means that if the voyage is not completed within the specified period, the risk shall be covered until the voyage is completed, or till the arrival of the ship at the port of call.
  • Mixed Policy - is a combination of voyage and time policies and covers the risk during particular voyage for a specified period of time.
  • Valued Policy - is a policy in which the value of the subject matter insured is agreed upon between the insurer and the insured and it is specified in the policy itself.
  • Open or Un-valued Policy - is the policy in which the value of the subject matter insured is not specified. Subject to the limit of the sum assured, it leaves the value of the loss to be subsequently ascertained.
  • Floating or Declaration Policy - is a policy which only mentions the amount for which the insurance is taken out and leaves the name of the ship(s) and other particulars to be defined by subsequent declarations. Such policies are very useful to merchants who regularly despatch goods through ships.

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