Transcript of "Types of marine insurance contracts"
In one form or another, we all own insurance. Whether itsauto, medical, liability, disability or life, insurance servesas an excellent risk-management and wealth-preservation tool. Having the right kind of insurance is acritical component of any good financial plan. While mostof us own insurance, many of us dont understand what itis or how it works.
Marine insurance is a contract whereby theinsurer undertakes to indemnify the assured,in manner and to the extent thereby byagreed, against marine losses, i.e. the lossesincident to marine adventure
Marine Insurance is not of recent origin. Its existence can be tracedback to several centuries. Questions concerning it have naturallybeen coming up for a number of years and the law concerning ithad taken a definite shape much prior to 1906 when the EnglishMarine Insurance Act was passed with a view to codify that law.Contrary to popular belief, Lloyds‟ of London was not the firstgroup of people to offer insurance for maritime commerce. Thefirst form of marine insurance dates back to the year 3000 BCwhen Chinese merchants dispersed their shipments amongstseveral vessels so as to abridge the possibility of damage to theproduct(s).
Since independence Indian shipping had undergone aconsiderable expansion, and it became mandatory for anIndian legislation consistent with Indian conditions, for thesmooth development of Indian marine insurance. But, as in the case of its English counterpart, the Indian Actembodies only some and not all of the legal principles andrules of marine insurance, and its language is so extremelyconcise and general that its full import and meaning canscarcely be understood without referring to the existing lawwhich it was intended to express or to the decided casesfrom which that law was evolved.In India the law of marine insurance has been put in astatutory form since 1963.
Hull and machinery insuranceis to protect the ship owner‟sinvestment in the ship. It isbasically a property insurancewhich covers the ship itself,the machinery and equipment.Furthermore, the insurancecovers some liabilities,normally collision liability withanother ship and sometimesalso liability for colliding withother objects than anothership.
Total loss of the ship Damage to the ship, engines and equipment Explosions and fire Groundings – damage to the ship, salvage of theship and possible contribution in generalaverage Collisions – damage sustained to the ship andsometimes also liability towards the other ship. Striking other objects – damage inﬂicted to ownship and sometimes also liability towards theowners of the other object.
Cargo insurance (also called marine cargoinsurance) covers physical damage to, orloss of your goods while in transit by land,sea and air and offers considerableopportunities and cost advantages ifmanaged correctly.
Open CoverThis is the most usual type of cargo insurance, where apolicy is drawn up to cover a number of consignments. Thepolicy can be either for a specific value that requiresrenewal once the insured amount is exhausted or anpermanently open policy that will be drawn up for anagreed period, allowing any number of shipments duringthis time.Specific (Voyage) PolicyAlthough not the norm for cargo insurance, you may fromtime to time need to approach an insurance company (orbroker, or other intermediary) to request an insurancepolicy for a particular consignment. This is usually referredto as Voyage Policy as the insurance covers only thatspecific shipment.
As an exporter you may often sell goods on termswhere your customer (as the importer) is responsible forinsuring (or at least bearing the risk of damage of orloss to) the goods, for example under FOB and CFRIncoterms 2000. In these cases you are exposed to therisk of damage to the goods while in transit and yourcustomer refusing to accept them. In the worse caseyour customer may not have insured the goods.Contingency insurance
THE „CARGO‟ TRANSPORTED BY SEA IS SUBJECT TOMANIFOLD RISKS SUCH AS: _LOSS OR DAMAGE AT THE PORT AND _ LOSS OR DAMAGE DURING THE VOYAGE. - MARINE CARGO INSURANCE‟ PROVIDES THEINSURANCE COVER IN RESPECT OF:LOSS OF ORDAMAGE TO CARGO
There are many different things that can potential happenduring shipment of cargo and container on a ship. Theloading cranes could damage the containers, theft andpiracy, weather damage, as well as potentially losing thecargo overboard or other marine disasters. All of thesepossible issues are exactly why you need marine cargoinsurance. Your goods need to be protected, and if you area company transporting goods this way, then you need toprotect your company from these potential issues of loss.
Protection and Indemnity insurance, or “P&I” as it isusually called, is a ship owners insurance cover for legalliabilities to third parties. “Third parties” are any person,apart from the ship-owner himself, who may have a legalor contractual claim against the ship. P&I insurance isusually arranged by entering the ship in a mutualinsurance association, usually referred to as a “club”. Ship-owners are members of such clubs. Legal liability isdecided in accordance with the laws of the country wherean accident takes place. The P&I insurance cover forcontractual liability is agreed at the time the ownerrequests insurance cover from the club and is usually inaccordance with the owner‟s responsibility under crewcontracts or special terms relating to the trading pattern ofthe vessel.
Other risks covered include liability for stowaways, liabilityfor oil pollution and other types of pollution and legalliability for wreck removal if the ship sinks and is blockingfree navigation for other vessels. In short, P&I insurance isa very comprehensive type of insurance cover which makesit easier for a ship owner or charterer to trade ininternational shipping transportation. P&I is as importantto a prudent ship owner as his Hull and Machineryinsurance cover.
P&I insurance also covers the owner‟s liability for lossof crew belongings in cases of shipwreck or fire onboard. The cover only applies to items which aredeemed to be reasonable for any crew member tohave with him on board. A crew member travellingwith unusually expensive items, such as laptopcomputers, gold watches etc should make sure thathe has such items separately insured.
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