Concept Of Marine Insurance Policy
Marine insurance policy is a contract whereby the insurer indemnifies the loss caused by perils of the sea. The duration of its effectiveness, insurable interest of the insured and the principle of utmost good faith are, among others, necessary elements in a marine insurance policy.
Besides, the value of the object must be clearly described for the sake of indemnity. It is also necessary that obligations and liabilities to be taken by the insurer must be declared in the policy.
The subject matter of marine insurance policy generally include ship, cargo, and freight. However, two additional elements i.e. terms of time factor and valuation of object are also considered as legal requirements for the insurance policy.
Types Of Marine Insurance Policy
Marine insurance policy can be classified into five types as follows:
1. Types of marine insurance policy on the basis of hull
Loss may occur in or to the ship if any event happens in sea routes. The ship may totally or partially damaged. In any case, the loss is very big one. Since the ship is very valuable, it becomes necessary to insure it. The insurance of ship is called hull insurance policy. Generally, hull insurance is entered for a specified period; and if any loss incurs within the period, the insurer indemnifies the loss. The following are the types of marine insurance policy on the basis of hull:
i. Single vessel policy
Single vessel policy covers only one ship. Thus the shipping company possessing many ships may enter into contract with the insurance company for each ship separately.
ii. Fleet policy
A shipping company may own a number of ships. The insurance company may insure all the hips under a single policy, which is known as fleet policy. Fleet policy allows the shipping company to include several ships of a particular route under a single policy.
iii. Construction policy
The ships under construction are insured under construction policy. This policy covers the ship that is under construction in the yard, and is not allowed for normal sailing in the ship, except for trail sailing.
2. Types of marine insurance policy on the basis of cargo
In marine insurance, not only ships but also cargo are insured against the loss caused by sea perils. When the owner, consignor or sender insures the cargo against the marine loss, it is called cargo policy. The cargo insurance policy is of three types:
i. Named policy
As its name suggests, the name and registration number of a particular ship, and the quantity of each type of goods on board are written clearly in such a policy. If any loss occurs to the goods on board as specified in the policy, the insurance company is liable for the loss.
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ii. Floating policy
Floating policy is also known as running cargo policy. It describes the general terms and leaves the amount of each shipment and particulars to be declared later on. This policy is taken out for a round large sum, which is specified at each declaration and is attached to each shipment.It protection for the risk of loss of cargo, the value of which may change from one shipment to another.
iii. All risk policy
All risk policy covers all risks associated with the cargo from godown to godown. Besides, the risks of sea perils, other risks of loss caused by out-break of war, strikes, negligence ans so on are also covered under this policy.
3. Types of marine insurance policy on the basis of freight
The freight is carriage payable to the shipping company by the owners of the goods upon the arrival of ship at the port of destination. A shipping company can purchase the freight policy in order to have protection against the loss of freight and other contingent liabilities. Generally, freight insurance policy are of two types:
i. With cargo freight policy
It is a contract between the shipping company and the insurance company for the protection of cargo as well as freight from any unseen risks. Under this policy, the insurance company indemnifies the loss of cargo as well as the loss of freight of the cargo to the shipping company.
ii. Without cargo freight policy
If the contract between the shipping company and the insurance company takes place only for the protection of freight of cargo from any contingent loss, such a contract is called without cargo freight policy.
4. Types of marine insurance policy on the basis of term
The marine insurance policy can be classified on the basis of term of period for the voyage:
i. Time policy
Time policy provides the insured to cover all marine risks for a specified period of time not exceeding 12 months.
ii. Voyage policy
A voyage policy covers all marine risks involved in a particular sea voyage, irrespective of the time taken to accomplish the voyage. Therefore, the policy is issued to cover the voyage from the port of origin to the port of destination.
iii. Mixed policy
Mixed policy is a combination of both time and voyage policy. This policy, therefore, combines the elements of both time and voyage policy. This policy is taken by the insured for specified time and voyage.
5. Types of marine insurance policy on the basis of valuation
On basis of valuation of objects being shipped, there are two types of marine insurance policy:
i. Valued policy
In this policy, the value of objects insured is fixed in advance at a time when the contract is consented. If any loss occurs, the same will be indemnified on the same basis.
ii. Unvalued policy
Under this policy, the value of the object is not specified. The value of the object to be calculated after considering many expenses during the period. Thus, the value for indemnity is ascertained if and when the loss actually occurs.
