10. Marine Insurance

Ships and their cargoes at sea run the risks. These include fire, storm, collision, theft, leakage, explosions and many others hazardous. To protect themselves against these hazardous shipowners, charterers and shippers take out marine insurance policies to cover themselves against the risk of casualties at sea. Marine insurance differs from life, accident and fire insurance because it is very difficult to establish fixed rates in this branch of insurance. Marine insurance today is even more vital to shipping and overseas trade.

We have different types of insurance policies covering the ship from when she is being built right up until the date she is sent to the scrap yard or is written off as a total loss at sea.

There are three main types of property insurance in marine insurance:

Hull and machinery insurance.

This policy includes deck and engine room machinery, and inventory covering loading/discharging equipment, navigation instruments, anchors, chains etc.

Cargo insurance.

Cargo insurance may be taken out to cover goods of every kind which are being transported by ship under a B/L or C/P. Cargo may be insured by anyone who has a financial interest.

Freight insurance.

The term “freight” means the cost of transporting the goods. When the shipper of the goods pays the freight in advance (prepaid freight), the cost will be added to the value of the goods for insurance purposes.

During transportation the whole or part of consignment can be damaged. So there are particular average that means partial loss or damage caused to the ship or to a particular lot of goods. Particular average must be borne by the owners of the property suffering the loss, and is distinct from general average, which is distributed over the whole ship, freight and cargo

General average means any extraordinary loss, damage or expenditure incurred for purpose of preserving – the ship, the cargo and the freight. In case of general average losses are divided between all members of sea adventure.

Documents used in insurance.

The policy is the principal document. It is an evidence of the existence of the contract of Insurance.

There is floating policy, it covers a large quantity of goods for a fairly long period, usually a year, or it covers goods up to a large sum of money, and such a policy is represented by certificates for each separate consignment.

The scope of marine insurance

The scope of marine insurance may be looked at in two ways:

a. Perils covered

When insurance is effected, the intention is to provide financial compensation for any loss, damage or injury which may occur. Marine insurance applies particularly to losses arising from shipping and seaborne trade ventures.

Perils of the seas is a term found in marine insurance policies. This means that the peril must be something which can only occur in transportation by sea, not something which might just las well occur on land.

The term Perils of the Seas, does not cover such losses as Wear & Tear caused by the normal action of wind and waves. Perils of the Seas provides cover for such casualties as collisions, fire, theft (with violence - not pilferage which must be included specifically in the policy for cover to be provided) etc. War risks may also be insured for under the war clauses.

b. Insurance of property

The scope of marine insurance applies to the perils covered. It also applies to the property covered.

When looking at the insurance of property, we must first take a look at one of the fundamental principles of insurance.

c. Insurable interest

If the marine insurance contract is to be properly valid, the assured must have an insurable interest in the item insured. This means that the assured must be interested in keeping the item insured safe, in good condition and undamaged land that he will benefit from Its safe arrival.

In marine insurance, however, in contrast to other types of insurance, ft Is not necessary for the assured to have an insurable interest at the time of effecting the insurance, but he must expect to acquire such an interest. What is important is that he must have an insurable interest at the time of loss If he is to receive compensation from the insurance companies.