Marine insurance definition refers to the insurance of goods dispatched from the country of origin to the country of destination. The term originates from the fact that goods intended for international trade were traditionally transported by sea. Despite what the name implies, marine insurance is applicable to all modes of transportation of goods. When the goods are sent by air, their insurance is also known as marine cargo insurance. Insurance is often compulsory in many export trade contracts. It can be the obligation of the exporter or the importer to pay the insurance cost on the shipment, depending on the terms of the contract. However, the need for insurance goes beyond contractual obligations, and there are several valid arguments for buying it before dispatching the export cargo.

Marine insurance transfers the liability of the goods from the parties and intermediaries involved to the insurance company.

Goods should only be insured for transit by one of the following three parties:

• The Forwarding Agent
• The Exporter
• The Importer

Marine insurance transfers the liability of the goods from the parties and intermediaries involved to the insurance company. The legal liability of the intermediaries handling the goods is limited, to begin with. The exporter, instead of bearing the sole responsibility of the goods, can buy an insurance policy and get coverage for the exported goods against any possible loss or damage. The carrier of the goods, be it the airline or the shipping company, may bear the cost of damages and losses to the goods while onboard. However, the compensation agreed upon is mostly on a ‘per package’ or ‘per consignment’ basis. The coverage so provided may not be sufficient to cover the cost of the goods shipped. Therefore, exporters prefer to ship their products after getting them insured the same with an insurance company.

Marine insurance is necessary to meet the contractual obligations of exports. To align with agreements such as cost insurance and freight (CIF) or carriage and insurance paid (CIP), the exporter needs to take marine insurance to protect the buyer’s or their bank’s interest and honor the contractual obligation. Similarly, in the case of Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP) terms, the seller may not be obligated to insure the goods, although in practice they generally do.

To avoid insurance claims, ensure the following:

• Packing of goods should be done keeping in mind their safety during loading and unloading.
• Packing should be good enough to withstand natural hazards to the best extent possible.
• Keep in mind the possibility of clumsy handling or theft when packing goods.

Types of Marine Insurance:

• Freight Insurance- In freight insurance, if the goods are damaged in transit, the operator would lose freight receivables & so the insurance will be provided on compensation for loss of freight.
• Liability Insurance- Marine Liability insurance is where compensation is bought to provide any liability occurring on account of a ship crashing or colliding.
• Hull Insurance- Hull Insurance covers the hull & torso of the transportation vehicle. It covers the transportation against damages and accidents.
• Marine Cargo Insurance- Marine cargo policy refers to the insurance of goods dispatched from the country of origin to the country of destination.