Marine insurance protects entrepreneurs, cargo owners and vessel owners from unforeseen and irreparable damage caused during marine, airway or roadway voyages. As the global economy heavily relies on seamless and streamlined commercial exchange between countries, import-export needs to be protected.
In order to secure your cargo or vessel, you buy marine insurance. It protects you from innumerable financial losses and damages. The transit cover insurance policy is important, no doubt, but is it mandatory? Will you be thereby held responsible for any losses caused during transit without a policy?
Let us find out!
Is Marine Insurance Mandatory?
As per section 5 of the Marine Insurance Act of 1963, any business with an insurable interest should engage in a marine insurance contract. The section elaborates that any lawful maritime adventure or voyage must be subjected to a marine insurance policy that can financially protect the cargo, freight and vessel.
Buying marine insurance is mandatory by law. However, any responsible and ethical trader will invest a sufficient amount of money and offer their cargo and vessel with substantial security. You need marine insurance because, apart from being required legally, the policy covers the cargo owners and vessel owners against maritime perils.
If you fail to secure your cargo with a marine insurance policy, you will inevitably bear the loss of your shipments.
How Does Marine Insurance Work?
1. Policy Purchase
As a cargo or freight owner, you must value your shipment efficiently. Valuation of the cargo helps you determine the sum assured of the policy, i.e., the maximum amount the insurer will pay the policyholder in case of marine losses. Once you have valued the cargo, purchase a policy for the same.
A marine insurance policy is designed to protect your vessel or cargo from and to the locations throughout the voyage and from and to the warehouse. Select your policy accordingly. Since marine insurance policies are customisable, you can personalise the policy according to your preferences.
2. Premium Allotment
Once you have determined the sum assured, route of the voyage, total cargo, and policy inclusions and add-ons, the insurance company will allot a certain premium. The policy premium is influenced by various factors such as mode of transport, risks involved and value of the good.
Once you pay the premium to the insurer, you have made a contract of protection with the insurer. Companies like TATA AIG offer great protection with marine insurance at lower premium amounts.
3. Claim Process
Suppose you carry out the voyage without any damage or loss, and the shipment is successfully transported. In that case, you do not have to raise a claim. However, if your shipment experiences loss and damage to your insured property, you can file a claim with the insurance company.
In order to raise a claim, you will need proof of loss, policy documents, a proper set of documents, bills, cargo receipts, evidence of the value of lost goods and more.
4. Verification and Assessment
Once you have filed a claim, a third party or insurance surveyor will be involved in the claim procedure. This surveyor is appointed by the insurance company.
This surveyor will verify and assess the situation, calculate losses, detect flaws and make an analysis for the company to view. The surveyor will verify the documents, evidence, and extent of loss caused by the accident.
5. Acceptance of Rejection
Based on the analysis provided by the surveyor, if your claim is true and genuine, the insurance company will provide you with adequate financial compensation. However, if the claim is not legitimate, is inaccurate or wrongfully raised, you will not be compensated.
This is also the case if the cause of the accident is listed in the exclusions of the policy. Ensure buying your policy from a reliable insurance company to receive rightful claims.
What are Transit Marine Insurance Inclusions?
- Natural calamities like earthquakes, storms and cyclones
- Human error disasters like fire or explosion
- Accidents collision of vessels, sinking or overturning
- Risks while loading and unloading cargo
- Protection while packing and unpacking goods
- Theft and pirate attacks
- Accidental damages
What are Transit Marine Insurance Exclusions?
- Inherent flaws in the shipment or the vessel
- Latent defects or undetected issues
- Improper packaging losses and damages
- Deliberate or willful misconduct by the insured party
- Undocumented or unexplained loss or shortage of goods
Summary
So, is marine insurance mandatory? Absolutely. It is not just mandatory, but it is also extremely necessary. It is not possible to navigate the seas without financial cushioning or a backup plan.
Any form of transit needs security, and a marine insurance policy provides just that. By understanding the mandate, marine insurance functions, inclusions and exclusions, your purchase and claim process will be simplified.
