Every shipment has its own journey. It might leave the factory, go to a warehouse, drive on roads, meander through ports and sea channels until landing at the buyer’s front door. As goods pass through various points and transit, the topic of marine insurance crops up. This covers risks to named goods being transported, in accordance with the prescribed policy.
What Is Marine Cargo Insurance?
Marine cargo insurance can cover goods while they are being transported by road, rail, air, or sea, depending on the policy. Remember that the cover is not limited to goods travelling by sea.
A shipment can pass through several stages before it reaches its destination, like:
| Part of the Journey | What It Can Involve |
| Origin | Goods leaving a factory, warehouse, or other starting point |
| Transit | Road, rail, air, sea, or combined transportation |
| Handling | Loading, unloading, or transhipment |
| Destination | Delivery to the destination, subject to policy terms |
The exact period of insurance and applicable conditions depend on the policy wording.
What Kind of Goods Can Be Insured?
While the type of freight can be completely different. For an example, a business might need to ship raw materials to a manufacturing unit, finished products to a distributor, or merchandise to another one oversea buyer.
A consignment could contain:
- Textiles and garments
- Machinery or equipment
- Raw materials
- Consumer goods
- Manufactured products
Knowledge about the value and type of goods, route, and means of transportation are also important parameters when arranging an insurance.
What Can Marine Cargo Insurance Cover?
Depending on the policy, cover can respond to either physical loss or damage to the goods insured by an insuring agreement as a result of one or more defined covered perils. Marine cargo policies can also be based on various modes of transportation and therefore include unique provisions relating to the start or termination of a transit path that is covered by insurance. A word in an official marine cargo policy, for example, states when cover is attached and terminated.
In some policies, general average applies as well; this is a provision common with marine insurance, and it refers to certain situations at sea under which an extraordinary sacrifice or expense is incurred in preserving the ship, cargo and voyage from a common peril. An instance of this would be willingly discarding cargo to assist with the rescue of a distressed ship. How general average is dealt with varies from case to case and policy to policy.
What Might Not Be Covered Under the Policy?
This could involve exclusions such as:
- The fundamental quality of the goods
- Inadequate or unsuitable packaging
- Certain types of delay
- Wilful misconduct
- Risks or losses that are expressly excluded under the policy
This is not an exhaustive list of things to exclude. The policy document continues being the best reference for all the details.
How Can You Decide What Cover Your Shipment Needs?
Factors to consider include type and value of goods being shipped, route, and modes of transport involved. In the case of international shipments, the sales contract and applicable trade terms may determine that insurance is arranged by specified party (the buyer or seller).
Here is what you should check before buying a policy:
- What is the route and transport modes?
- Who owns the products at each step?
- When does the insured transit take place?
- What does the policy say about risks, exclusions, limits and condition in the case of a loss?
Conclusion
Marine insurance is intertwined with the nature of shipment and the contract basis. If you are purchasing or supplying goods find out who is to make arrangements for insurance, and whether the agreed terms. This is particularly relevant in international trade where the sale contract and terms for trade can allocate which party is responsible for insurance. Verifying this detail before the transaction is complete can avoid all future problems.
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