Marine insurance can be difficult to understand, especially since it is largely unregulated due to the international nature of the industry. Despite this, it is essential for businesses engaging in international trade, especially those shipping large quantities of goods by boat. Specific terms and benefits vary widely across the world, and many marine insurance policies are custom tailored for specific shipments, but a few general principles apply to the entire industry.
Coverage for Goods
While you have the option of sending your freight without any insurance, if you do so you would bear the entire financial cost in the event of damage or loss of your shipment. You do have legal recourse against the carrier, but this can be a lengthy and complicated process, and international law strictly limits carrier liability, according to SITPRO, an export facilitation company in the United Kingdom. Protecting the value of your goods is the primary benefit of marine insurance.
No universal list of perils that are covered by all marine insurance policies exists. Policies range from "all peril," which pays for damage regardless of cause of loss, to only perils specifically named in the policy. A marine insurance policy written by the ACE European Insurance Group would cover perils such as theft, hijacking, transportation mistakes such as inappropriate handling, vessel sinking, rain and saltwater exposure and temperature variations. Additional causes of loss can be stipulated as needed.
Different types of marine insurance exist as well. Policies are available to protect the goods while in transit on the ship, but damage can occur while the ship is in port, while the goods are in transit to the warehouse or while at the warehouse itself. Marine insurance policies can be endorsed to cover all these instances, or a policy can be purchased individually to provide cumulative coverage for all locations of your goods.
- cargo ships 2 image by Aaron Kohr from Fotolia.com