Easily one of the oldest lines of insurance; getting marine insurance is extremely important when one transfers physical products either through rail, road, train, air or sea. It primarily protects the goods against damage or loss in the course of transit.
Marine contracts are highly customizable and can easily be tailored to an individual’s specific marine situation with optional add-ons to cover damage caused during towing (both on and off-water), and so on. Basic policies cover any accidental damage that may occur as a result of a collision, sinking or vandalism. The contracts can be generally classified into 2 types:
Specific policy– this is taken if one is insuring a particular voyage; like in the case of transferring something from one location to another. However this type of policy is not suitable for most businesses where goods are transferred on a regular basis from one area to another; as the business would find it very tiresome to get a separate policy each time.
Open cover policy- This type of policy covers marine risks for a certain sum assured, and is sort of like a blanket policy. It is used by businesses that need to transport goods on a regular basis to different locations. Like in the case a company transports goods worth Rs 1 lakh everyday to various countries then they would simply take a policy for a sum assured of 365 lakh instead of taking 365 different policies. In this case the limit of the policy reduces everyday and the insured only needs to show the invoices for shipped goods.
Marine insurance can at times be a rather difficult industry to comprehend and a company needs to keeps various things in mind while taking this policy. Companies like Secure Now which specialize in various types of insurance policies also offer professional advice and guidance to companies looking to purchase favorable marine insurance policies. Here are few common mistakes a company is likely to make while buying marine insurance.
Not getting salvage loss coverage
Getting marine insurance is primarily to cover any major mishaps. The most common disastrous type of insurance claims is due to sinking or hurricane claims; which can occur anytime. For both the cases it is essential to have a policy with “salvage” coverage; in order to guarantee getting proper insurance cover and any good policy will have a separate plus a full salvage cover (up to the policy’s limits). Not opting for salvage loss cover could mean that the amount may have to be paid by the insured company, which eventually doesn’t serve the benefit of getting an insurance policy.
Not opting for a specialty marine insurer
While handling a claim either the insurance company during a mishap may help through the entire process of marine insurance; while another wouldn’t have the required expertise and would expect the company to do all the work. Hence it is essential to get marine insurance cover usually from a specialty marine insurer; as they would generally be able to provide unique services and also have the required information about procedure and documentation while filing claims, known-how in negotiating prices and other details involved during marine insurance.
Not reading the policy wordings carefully
In marine contracts, it is very important the insurance cover includes losses due to “consequential damage”. In this type of insurance disastrous losses that include fire, explosion, sinking, demisting, collision or stranding are considered a “consequence” and if consequential damage is not covered in the insurance policy then even sinking or fire may be excluded.
Hence one must read the wordings of the policy carefully, as the policy may not particularly mention consequential damage is covered; but one way to know it is not included would be if the policy has exclusions listed as fire, explosion, sinking, demisting, collision or stranding, grounding, lightening strike or hurricane damage in an “All Risk” policy. If uncertain on the type of cover provided; it would be best to check with the insurance agent or company and specifically confirm with them whether the consequential damage cover is included.
Annual all-risk policy cover
A company may be unaware that an annual all-risk shipping insurance policy does extend to goods temporarily stored during the normal course of transit. But warehouse insurance coverage can be added; in the case of goods stored outside normal course of transit; like goods stored in the importer’s warehouse pending final shipment.
Comparison with other marine contracts
A company normally doesn’t have the time to compare with other policies available; before buying the policy. Generally a good insurance policy provides emergency claim response which can immediately provide assistance in case of any mishap to prevent further losses. Some policies might also provide benefits in the form of reducing the amount of deductibles each year the company remains claims free and so on.
The best solution to avoid these common mistakes would be; for a company to make a decision based on expertise opinion from an insurance agent or company; who have all the pre- requisite knowledge about marine insurance policies.