Transporting goods from one location to another has become a necessity of modern economics. As a result, transporters worldwide are sending and receiving packages all the time. The owner of the goods can have lots of financial problems if the packages get lost or damaged during transportation. In such cases, marine insurance can give financial protection to the owner. In exchange for a small insurance fee, the insurance company will provide full financial coverage against any mishap to the package. Let’s learn how marine insurance work and what the advantages and disadvantages coupled with it.
Key Takeaways
- Marine insurance is a type of insurance policy that covers damages or losses incurred during the maritime transport of goods or cargo.
- Marine insurance policies cover a range of risks, such as loss of cargo, damage to ships, and liability for third-party claims.
- Marine insurance policies are essential for individuals and businesses involved in international trade or maritime transport, as they help mitigate the financial risks associated with these activities.
How does it work?
It is a type of insurance covering goods transported on a cargo ship, vessels, and through terminals. With this insurance, the policyholder agrees with the insurance company that the insurance company will reimburse the policyholder if the goods got missing or damaged during the transportation. In exchange for this assurance, the policyholder must pay a certain insurance fee.
Certain risks are associated with transporting any goods from one location to another. The item can get lost or damaged during the transportation process. Any exporter, importer, or forwarding agent can obtain marine insurance for goods. Marine insurance can be categorized into three types depending on the transportation method. These types are marine cargo insurance, hull insurance, liability insurance, and freight insurance.
A marine insurance claim can be voided under certain conditions. The insurance claim will be voided if the good is not packed properly for transportation. The packaging has to withstand natural hazards like rain, snow, or hot weather. The package also has to be good enough for clumsy handling. Marine insurance provides financial assurance to the transporter and saves them financially during any transportation mishap.
Advantages of Marine Insurance
Marine insurance provides multiple benefits to the owners and transporters of the goods. The policyholder will get full financial coverage if any accidents occur during the transportation period. Marine insurance also gives financial coverage against any theft or hijack. The policyholders also attain financial coverage if the goods get damaged by bad weather conditions like rain or snow. Marine insurance also covers some degree of compensation for any transporter’s injury, illness, or death onboard the ship. The policyholder can also claim coverage for cargo mishandling or transport mistakes.
Disadvantages of Marine Insurance
There are not many disadvantages associated with marine insurance. The insurance premium fee indeed adds a little cost to the shipment. As a result, the price of transportation cost increases a bit. But compared to the risk involved in a shipment, it is very low. It is advised to read the fine print in the insurance agreement paper.
In a few cases, the insurance company may refuse to compensate the insurance claim. Marine insurance does not cover insurance claims if the damage occurs from the civil commotion. The company may also refuse to pay the insurance claim if the shipping item is improperly packaged.
References
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Piyush Yadav