1. Hull Insurance
Hull insurance is designed to cover the ship’s body, including its machinery and equipment. It protects against physical damage due to perils like storms, collisions, fire, or grounding.
- Who needs it: Shipowners, fleet operators, and charterers.
- Real-world use: Suppose a cargo vessel collides with another ship near the port. The damage to the hull can result in repairs costing millions. Hull insurance absorbs this financial hit.
2. Cargo Insurance
Cargo insurance is one of the most common types. It protects goods during transportation over sea (and sometimes land/air under extended policies).
- Coverage examples:
- Loss or damage due to sinking, fire, theft, or jettison.
- Partial loss due to rough handling or exposure to weather.
- Forms:
- Open Policy: For frequent shippers (continuous cover).
- Specific Voyage Policy: For one-time or irregular shipments.
- Example: If a container of electronics is lost during a typhoon while en route to Europe, cargo insurance reimburses the loss.
3. Freight Insurance
Freight insurance ensures that a shipping company gets paid even if the cargo is lost or damaged.
- Who needs it: Freight carriers and ship operators.
- Example: A shipping company is set to receive $50,000 for delivering cargo from Singapore to Australia. If the cargo is destroyed mid-sea, freight insurance compensates the unpaid freight charges.
4. Liability Insurance (P&I)
Protection and Indemnity (P&I) insurance is crucial for legal and third-party liabilities. It provides cover for:
- Injuries to crew members or passengers.
- Environmental damage (e.g., oil spills).
- Damages to docks or third-party vessels.
- Legal defense costs.
- Example: When a ship owned by a Greek company caused an oil spill near a South American coast, P&I insurance helped cover the clean-up cost and compensations running into tens of millions.
5. Marine Inland Insurance
This type of insurance covers cargo in transit within a country—often over land—as part of its journey to or from a port.
- Use case: A container travels by truck from a warehouse in Texas to the port of Houston for international shipping. If it is damaged in an accident during land transit, marine inland insurance covers the loss.
6. Voyage Policy
This is a short-term policy tailored for a single voyage.
- Example: A merchant exporting spices from India to the UAE might take a voyage policy covering the journey from Kochi port to Dubai port. Once the journey ends, the policy lapses.
7. Time Policy
Covers a vessel or cargo for a fixed period, commonly one year.
- Best for: Shipowners and fleet managers who operate throughout the year.
- Example: A fishing company with multiple vessels purchases a 12-month time policy to cover all commercial fishing operations globally.
8. Mixed Policy
This combines features of time and voyage policies, giving more flexibility.
- Use case: A shipping company operating seasonal routes may use a mixed policy to cover ships for a specific voyage within a fixed time frame.
9. Valued Policy
This policy agrees on the value of the insured item beforehand. This simplifies claims.
- Example: A textile shipment is insured for $200,000 under a valued policy. If it’s lost at sea, the insurer pays out the full amount without assessing current market prices.
10. Unvalued (Open) Policy
The value is not fixed at the start and is determined at the time of claim.
- Best for: Businesses dealing with commodities whose prices fluctuate.
- Example: A shipment of crude oil insured under an unvalued policy is lost. The payout is based on the market value of the oil at the time of loss.
⚠️ Additional Coverage Options
Some marine insurance policies come with optional clauses or extensions for:
- War and strike risks: For cargo traveling through war zones or politically unstable areas.
- General Average contributions: Covers shared losses when cargo is intentionally sacrificed to save a voyage.
- Demurrage or Delay: Compensates for time lost due to insured events.
🧭 Importance of Marine Insurance
With over 80% of global trade carried by sea, marine insurance is indispensable. It protects:
- Businesses from supply chain disruptions.
- Shipowners from massive repair costs.
- Exporters/importers from total loss of goods.
- Third parties from legal liabilities.