What is Marine Cargo Insurance and How Does It Work?
In a world where interconnectedness is giving rise to new business opportunities that are shaping the infrastructure for industry 4.O. The channels of modern-day businesses are spread across roads, rail, water, and air. Despite the swift advancements in technology in various sectors, the inherent risks associated with transporting goods persist. Unfortunately, risks like natural calamities, fire, theft, strikes, war, and other unforeseen circumstances have risen considerably along with an increase in inter- and intra-border transportation.
In such circumstances, cargo insurance is the only solution to safeguard the risk associated with the transit of goods. Usually, things like insurance are dealt with after all the necessary tasks are done. To some extent, this is practical for business because it’s hard to estimate accurately until your goods are ready to be dispatched.
The matter of concern starts when most businesses start to rely on shipping or other third-party agents for their insurance needs. While there’s nothing inherently wrong with this approach, it’s crucial to select the correct and knowledgeable subject matter expert who can thoroughly review all the terms and conditions to ensure that, when there is a loss, the settlement of a claim is just and fair.
A marine cargo insurance agreement is an agreement between the cargo owners and the insurance company. It is an agreement transferring the risk of damage to cargo to the insurance company in case of unforeseen circumstances.
This ensures two major benefits:
- Expert technical support from the insurance company during the time of loss or damage.
- A seamless trade experience every time.
Marine cargo insurance covers transit from point to point, depending on the nature of the trade contract between buyer and seller.
Few of the popular trade contracts are.
- Ex-works
- CNF / Fob / C&F
- CIF / CIP
- DAP / DDP etc.
Coverage under marine cargo insurance:
The type of coverage provided by the insurance company depends on the nature of the cargo, type of packaging, and mode of transport. The insurance umbrella consists of various types of coverage; therefore, it is always suggested to plan before purchasing a cargo insurance policy. Below are the three major coverages provided by the insurance company.
ICC C – BASIC STANDARD CARGO COVER AGAINST MAJOR CASUALTIES
ICC B – WIDER INTERMEDIATE FORM OF COVER
ICC A – BROADEST COVER ON AN ALL-RISK BASIS WITH EXCEPTIONS
MARINE CARGO INSURANCE POLICY EXCLUSION:
THE INSTITUTE CLAUSES RETAIN GENERAL EXCLUSIONS UNDER ALL THREE COVERAGES SUBJECT TO SPECIFIC ADD-ON COVERAGES MENTIONED IN THE POLICY.
Types of marine cargo insurance policies:
- Specific transit policy
- Open marine policy
- Sales turnover policy (stop)
- Bulk cargo policy
Important factors for the smooth functioning of Marine Cargo Insurance:
Mode of Transportation: An importer or exporter will usually choose water or airways for delivering the cargo, whereas businesses that trade locally will go by road or railway. Therefore, defining the means of your transportation gets you going in advance.
Route of Shipment: The destination of your consignment and geographic path truly define the kind of risk associated with your cargo. Routes through war zones or pirate waters increase exposure to multi-dimensional risk. Longer ocean voyages face more perils than short hauls. All these factors are taken into consideration by the insurer while structuring appropriate policy terms and conditions.
Valuation of Goods: The marine cargo insurance is declared a value policy. Generally, the value declared under the invoice is considered for the calculation of the premium plus duty component, if any, on an actual basis. Underinsurance or over insurance is considered, if any, at the time of loss.
Claims Handling and Documentation: The insurance company requires prompt notice and documentation for cargo loss claims. Submitting proof like survey reports, invoices, freight receipts, and custom forms is the key. Thorough paperwork and responses from the insured will facilitate a fair and timely claim settlement.
Reputation: The insurer’s reputation and financial strength are critical for their business. Large losses can strain the insured. A history of fair claim settlement matters the most. Pick an insurer known for managing losses promptly.
All these factors play a major role in the basic functioning of Marine Cargo Insurance. Before insuring your goods directly or through your agent, always remember to primarily check all these factors.
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