Transporting goods from one location to another location has become a necessity of modern economics. As a result, transporters around the world 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 get 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 are the advantages and disadvantages coupled with it.
How does it work?
It is a type of insurance that covers goods that will be 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 needs to pay a certain fee for the insurance.
Certain risks are associated with the transportation of 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. Depending upon the transportation method, marine insurance can be categorized into three types. These types are marine cargo insurance, hull insurance, liability insurance, and freight insurance.
A marine insurance claim can be voided in 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 some financial coverage if the goods get damaged by bad weather conditions like rain or snow. Marine insurance also covers some degree of compensation for injury, illness, or death of any transporter on-board the ship. The policyholder can also claim coverage for mishandling of cargo or mistakes in transport.
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 prints 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 not packaged properly.