Marine Insurance
Also known as: Cargo Insurance, Marine Cargo Insurance, Ocean Cargo Insurance
Definition
Marine insurance (also called marine cargo insurance) provides financial protection for goods shipped by sea against loss, damage, or theft during transit. It fills the significant gap between actual cargo value and limited carrier liability.
Why Marine Insurance Matters
Carrier Liability Limits
- Ocean carrier (COGSA): $500/package
- Your $100,000 container: $500 coverage
- Gap: $99,500 unprotected
What Could Happen
- Container falls overboard
- Ship sinks or catches fire
- Cargo damaged by water/weather
- Theft at port
- General average declared
Types of Marine Insurance Coverage
Coverage Levels
| Level | Coverage | Best For |
|---|---|---|
| All-Risk | Broadest protection | High-value cargo |
| Named Perils | Specific risks only | Standard cargo |
| Free of Particular Average | Total loss only | Low-value cargo |
All-Risk Coverage Includes
- Water damage
- Theft and pilferage
- Breakage
- Fire
- Collision
- Jettison
- General average
- Loading/unloading damage
Standard Exclusions
- War and strikes (separate coverage)
- Nuclear events
- Inherent vice (product nature)
- Shipper’s negligence
- Delay
- Improper packaging
Institute Cargo Clauses
Industry Standard Forms
- ICC (A): All-risk coverage
- ICC (B): Named perils (broader)
- ICC (C): Named perils (basic)
ICC (A) - All-Risk
Most comprehensive, covers all risks except exclusions
ICC (B) - With Average
Covers:
- Fire, explosion
- Vessel sinking, stranding
- Collision
- Discharge at port of distress
- Jettison
- Earthquake, volcanic eruption
- Washing overboard
- Water entry (not rain/spray)
- Total loss of package
ICC (C) - Free of Particular Average
Covers:
- Fire, explosion
- Vessel sinking, stranding
- Collision
- Discharge at port of distress
- Jettison
- General average
How Marine Insurance Works
Getting Coverage
- Contact insurance broker or provider
- Provide shipment details
- Receive quote based on value
- Purchase coverage
- Receive certificate
Premium Factors
| Factor | Impact on Premium |
|---|---|
| Cargo value | Higher value = higher premium |
| Commodity type | Fragile/perishable = higher |
| Trade route | High-risk routes = higher |
| Packaging | Better packaging = lower |
| Claims history | More claims = higher |
Typical Rates
- Standard cargo: 0.2-0.5% of value
- Electronics: 0.3-0.7%
- Fragile goods: 0.5-1.5%
- High-risk routes: Add 0.2-0.5%
Coverage Amount
Valuing Your Cargo
CIF + 10% Formula:
Cargo value (FOB): $100,000
+ Freight cost: $5,000
+ Insurance: ~$500
= CIF value: $105,500
+ 10% margin: $10,550
= Insured value: $116,050
Why 110%?
- Covers profit margin
- Covers incidental expenses
- Industry standard practice
- Ensures adequate recovery
Filing a Claim
Steps
- Document damage immediately
- Notify insurer within required time
- Preserve evidence (photos, samples)
- Gather documentation (B/L, invoice, survey)
- Submit claim with proof
- Cooperate with survey/investigation
- Receive settlement
Required Documentation
- Commercial invoice
- Packing list
- Bill of lading
- Insurance certificate
- Survey report
- Photos of damage
- Correspondence with carrier
Marine Insurance vs. Carrier Liability
| Aspect | Marine Insurance | Carrier Liability |
|---|---|---|
| Coverage limit | Full value | $500/pkg (ocean) |
| Basis | All-risk possible | Carrier negligence |
| Provider | Insurance company | Carrier |
| Exclusions | Fewer | More extensive |
| Proof needed | Damage occurred | Carrier fault |
Types of Policies
Single Shipment
- One-time coverage
- Specific shipment
- Good for occasional imports
Open Policy
- Ongoing coverage
- All shipments included
- Automatic protection
- Lower per-shipment rates
Blanket Policy
- Annual coverage
- Declares monthly/quarterly
- Best for regular shippers
- Most cost-effective
Who Needs Marine Insurance
Always Recommended
- High-value shipments
- International trade
- Irreplaceable goods
- Contractual requirements
Especially Critical
- CIF sellers (required)
- Letters of credit (often required)
- High-risk commodities
- Long ocean transits
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