Ocean Marine Insurance
What is Ocean Marine Insurance?
According to the UNCTAD, international sea trade volume reached an all-time high of 11 billion tons in 2018. With such high volumes of goods comes an equally high number of risky events. Here are some events that cause loss as well as damage to cargo ships
- Collisions with objects and other ships
- Pirate attacks
- Unpredictable weather
These events can cause millions of dollars’ worth of damages to shipping businesses and affect their operations. For example, 10 weather and climate disasters resulted in losses exceeding $1 billion in 2020.
In this article
Ocean marine insurance covers businesses from the risks associated with the transportation of goods across the ocean. The policy provides coverages for the following:
- Shipping vessel, also known as the hull
- Cargo being transported
- Revenue made by the shipping company
- Liabilities associated with shipping
What Does It Cover?
Ocean Marine Insurance provides the following coverages:
Hull and machinery coverage
The ship, its machinery, as well as operating equipment are all susceptible to physical damage. The damages can be due to accidents, fire, collisions, explosions or harsh weather; ocean marine insurance provides coverage against such damages. Furthermore, its coverage includes additional provision for collision liability coverage, which covers collisions at sea with other ships or fixed objects.
Protection and indemnity insurance
Ocean marine insurance policy provides coverage to ship owners from the legal liabilities associated with injuries to either passengers, crew, or other personnel. The liability can arise due to the following reasons:
- Vessel’s operation which causes an injury, illness or death
- Medical expenses for an injury, illness or loss of life.
- Expenses related to contactable diseases
Marine general liability insurance
Marine ocean insurance provides coverage against liabilities from either marine or vessel operations. These liabilities can result from the following reasons:
- Collisions leading to physical damage to other vessels or property
- Non-collision incidents that cause damage to other vessels or property
- Removal and cleaning of wrecks
- Oil spills or civil pollution liabilities
- Damage to on board cargo
Ocean cargo insurance
Ocean Marine insurance provides financial aid for losses arising from physical damage to on-board cargo. The damage can result from disasters such as bad weather, tidal waves, collisions, pirate attacks, cargo abandonment, or customs rejection. A few policies also cover the losses from theft and looting if the cargo is in transit or at an offshore location.
Ocean freight insurance
Ocean marine insurance provides financial protection to cargo vessel owners if they are either damaged or lost helping cover shipping costs, too. In case of damage to the cargo, the shipper needs to provide a replacement cargo, which results in the second payment of shipping costs. For such cases, ocean freight insurance will cover the damaged goods’ costs as well as the shipping charge.
Reach out to us today for a free quote on your ocean marine insurance.
Exclusions of Ocean Marine Insurance
The following are the most common exclusions of commercial ocean marine policies:
- Passenger ships: Ocean marine insurance policy does not include passenger ships such as ferries in its coverage.
- Employee strikes and civil riots: The policy does not include liabilities arising from employee strikes or civil riots.
- War: The policy does not cover damages or liabilities resulting from war.
- Cost of parts repair: The policy does not cover the cost for the repair of ship parts.
- Losses from shipping delays: The insurance policy does not provide coverage from losses resulting from a shipping delay.
- Willful misconduct: The policy does not provide coverage for losses resulting from negligence, recklessness, disregard and willful misconduct.
- Natural wear and tear: The insurance policy is not liable for damages resulting from natural wear and tear such as rust, hidden defects, prolonged use, and temperature extremes.
Types of Insurance That Include Ocean Marine Insurance Policy
Factors That Determine the Cost of Ocean Marine Insurance
The cost of any insurance policy certainly depends on a few factors. In the case of ocean marine insurance, here are the key factors that affect its cost:
Factors such as claims history, nature of loss, and details of past claims need to be considered before pricing the premium of Ocean Marine Insurance. The loss history and exposure to loss factors are important elements to consider while determining the policy rate. If the clients have made multiple claims in the past, then their premiums will also increase.
According to Investopedia, INCOTERMs are a set of conditions established by the International Chamber of Commerce to promote global trade. It is a globally accepted set of foreign trade rules that defines the buyer and seller’s obligations. The policy rate for insurance is affected since these terms identify the liabilities of both parties.
There are various routes a ship can take while transporting goods. Some routes can be riskier than others depending on the weather conditions and the likelihood of pirate attacks. Ships that take angerous routes need to pay more premium higher than those that do not.
The cost of ocean marine policy increases if the destination is difficult to reach. For example, shipments in hard to reach geographical regions or politically unstable locations have expensive premiums.
Vessel’s type and construction
The construction of a shipping vessel differs in its construction material, adaptability, as well as structural strength. These aspects affect their ability to carry different cargo. Additionally, the vessel’s age, classification, and shipping company also affect the policy’s cost.
Nature of the goods
Industrials materials such as cement have a higher chance of getting damaged in the shipping process. Transporting goods that cannot be salvaged tend to have a higher premium rate.
The premium rates are based on the policy coverages as per the client’s need. Some policies cover total loss, while some only cover partial loss. Also, a few insurers add or limit clauses in the policy, which can affect the cost.
What does cargo mean in ocean marine insurance?
Cargo refers to the products that are inside the shipping vessel. It can include any goods such as construction material, textiles, machinery, or automobiles. Cargo is a general term used to describe all items that are being transported.
Why should I purchase an ocean marine insurance?
Ocean marine insurance is essential for many businesses, such as exporting or importing goods, marine contracting services, or maritime transportation services. The policy assists you in overcoming unforeseen financial losses arising from damages or loss of goods at sea.
How is ocean marine insurance different from inland marine insurance?
Ocean marine insurance provides coverage for property transported on water bodies. It provides coverage to the vessel, cargo, and the liabilities related to shipping in domestic and international waters. Whereas inland marine insurance only provides coverage for property that is transported on land.
Reach out to us today for a free quote on your ocean marine insurance.
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