The Importance of Marine Insurance for Your Business: Ensuring Comprehensive Protection

“Marine insurance is required in many import and export trade procedures,” explains Drip Capital, a digital trade finance firm based in Palo Alto, in a guide on its website. “Accepting the terms, both parties are responsible for paying for the goods under the insurance. However, the subject matter of marine insurance goes beyond contractual obligations, and there is some good reason to purchase it before shipping the export cargo. “

How does marine insurance work?

Despite its name, marine insurance applies to all modes of freight. The International Risk Management Institute (IRMI) defines it as “insurance designed to provide cover for the carriage of goods by sea or by land, as well as for damage to and liability to third parties arising out of the process. “

Insurance can be taken by a forwarding agent, exporter, importer or anyone involved in the transport of the goods.

Read more: What remains to be one of the biggest safety issues of the maritime industry?

According to Drip Capital, this type of insurance works by transferring cargo liability from parties and intermediaries to the insurance provider.

“The exporter, instead of being solely responsible for the goods, may purchase an insurance policy and obtain marine insurance for the exported goods against any possible loss or damage.” The company explains and adds that “maritime coverage is necessary to meet the contractual obligations” of the goods transported.

“In order to comply with arrangements such as cost and freight insurance (CIF) or carriage and pay insurance (CIP), the exporter needs to purchase marine insurance to protect the interests of the buyer or the bank. their goods and honor their contractual obligations. Similarly, in the case of Delivery Unpaid (DDU) and Taxed Delivered (DDP), the seller may not be obligated to insure the goods, even though in practice they often do.” Trade finance company noted.

What does marine insurance cover?

Marine insurance has two branches – marine, which covers perils on the water and inland, which protects against perils on land.

Ocean marine insurance

According to the Insurance Information Institute (III), these types of businesses may need marine insurance due to marine perils:

• Marine service providers, including shipyards, builders and repairers, agents, dock operators and stevedoring workers
• Shipping supplier
• Businesses that depend on shipping overseas, including traders, freight forwarders, importers, exporters and manufacturers

Ocean marine insurance generally offers the following main premiums:

Some shipyards, docks, and other marine facilities also purchase specialized insurance policies called “bumbershoot” policies, which provide general coverage for a wide range of risks, including liability. , collision and rescue costs.

Read more: The tides are finally turning in US marine insurance

Like other types of insurance, marine insurance has exclusions. Loss due to the following is not normally covered but can be supplemented through special riders or endorsements:

• General wear and tear
• Marine life
• Mold, mildew and dampness
• Riot or other civil conflict
• War or military action

Ocean cargo coverage also ends when products continue to be transported overland, usually by train or truck. To be covered for ground transportation, businesses should purchase a separate policy called inland marine insurance, although some providers offer combined coverage for all forms of transportation. transfer.

Inland marine insurance

Inland shipping policies cover products that are shipped overland or while temporarily stored in a third-party warehouse. While a business owner’s policy (BOP) or commercial package policy (CPP) may already cover property located at a particular location or tools and equipment that accompany employees to the location, workplace, these policies do not cover the transportation of products or materials.

III advises companies to consider the nature of their business and operations before undertaking this type of insurance.

“Inland marine insurance is not just for companies that ship products to retailers and customers,” the institute explains. “For example, if you have a valuable exhibition booth that is regularly shipped around the country and stored offsite by a supplier, you may want to be protected by inland marine insurance. In addition, if someone else’s property is temporarily in your possession, inland marine insurance can provide coverage against the loss of this property”.

Under Regulation III, special inland marine insurance includes:

Read more: Marine insurers line up to ‘feel the pain’ from the container crisis

In terms of terms, marine insurance comes in three main categories. These are detailed in the table below:

How much is marine insurance?

The premium price for a marine insurance policy is based on the results of the insurer’s risk assessment, often taking into account a number of factors, including the level of risk, the type of ship and the construction, where origin of the goods and the terms of the program. and conditions.

Drip Capital has provided a formula for how insurance companies calculate insurance costs:

What are the types of marine insurance policies available?

There are also several types of marine insurance policies that businesses can use. Including: