Ocean Marine Insurance

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With thousands of cargo ships traveling the world daily, the risk of lost or damaged cargo is a very real scenario. Business losses could amount to millions of dollars and affect sales, business operations and probably lead to higher commodity prices.

To protect your goods while they are at sea and in transit, you need Ocean Marine Insurance.

This is a specialty insurance that covers legal liability for negligence, damages, and loss of revenue to cargo and ships, and anything else to do with marine transport. It provides you with the funds to help you recover from the losses of missing, sunk, or damaged cargo.

Read on to understand if this insurance is right for your business.

What Ocean Marine Insurance Is All About:

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What Is Ocean Marine Insurance Coverage?

Ocean Marine Insurance, by legal definition, refers to insurance that covers three property types: cargo, hull, freight plus liability from negligence. Of these property types, there are specific conditions as to what can be claimed as damages. For instance, the hull is only insured for specific risks such as collision with another object or ship, sinking, fire, piracy, capsizing, barratry or jettisoning.

For this type of insurance, two points must be met for claims to be approved and they are:

  • The ship’s owner has no prior knowledge of the accident
  • The damage or destruction is not caused by normal wear and tear or incidents of war

Do I Need Ocean Marine Insurance?

This insurance will come in handy if you are in the business of:

  • Marine Contracting
  • Supply of marine services
  • Marine transportation services
  • Export/import of goods
  • Fishing
  • If you own any private seafaring vessel like a yacht

With this insurance, you will be able to offset any unexpected financial losses that may occur while you or your goods are at sea. It also helps to expedite the processing of documents for export and import orders which would otherwise require a cash deposit or bond.

What Does Ocean Marine Insurance Cover?

Getting into details...

Loss of cargo

This happens when cargo is lost while in transit. Example: An oil spill or a collision that causes a container van to fall overboard.

Loss of revenue

This insurance type will cover revenues lost from a collision or accident while in transit. It could also mean loss in terms of theft while in transit. Example: When a ship is involved in a collision that causes cargo to be damaged or destroyed, the value of the cargo is covered by Ocean Marine Insurance.

Damage to hull

This refers to physical damage to the ship’s hull. Example: If the ship encounters bad weather, it can be pushed to collide with an object or crash into land causing damage to its hull.

Total loss

When ship sinks and can only be retrieved at great cost to the ship owner, it is considered a total loss as the cost of retrieving the ship would be too high.

Pirate attacks

This covers terrorist attacks whose main agenda is to steal cargo and hold crew hostages for money. Example: Pirate attacks are common on certain routes but increasing in number in places like Vietnam and Southeast Asia.

Grounded ships

This occurs for different reasons: negligence, weather, or lack of training

Who is covered by Ocean Marine Insurance?

  • Your Business

  • Your Vendors

  • Anyone You Enter into a Contract With

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What Are the “Limits” on an Ocean Marine Policy?

What Are the “Limits” on an Ocean Marine Policy? The limits would depend on the terms if each policy. However, the factors that are considered when assessing the limits of this type of insurance include:

  • Value of the goods
  • Type of products (toxic, valuable, dangerous)
  • The route to take and other potential hazards from start to destination

Generally speaking, the limit of this insurance type will be based on the valuation formula of the provider on the cargo.

In addition to that...

This insurance covers damages or losses of goods shipped by sea from the start of the shipping process up to the moment it arrives at its destination. It also covers cargo when it hits a port in a warehouse as well as certain rail transportation if it is a continuation of the previous cargo journey overseas. The coverage includes General Average Principle which is part of maritime law that provides for the proportionate share in losses among all parties, liabilities due to negligence, and coverage for the vessel used to transport the goods. It may also include replacement parts needed to repair damages.

It is possible to segregate the coverage according to commercial or personal cargo; cargo type; cargo segment; and hull coverage. It is not uncommon for shipping lines to carry a combination of products from different clients.

Under hull coverage, you have two types: blue water hull and brown water hull. Blue water coverage type refers to insurance for ships that sail on large bodies of water while brown water hull coverage is for boats that sail through inland waters or close to shore. Ocean Marine Insurance usually covers blue water trips.

For exporters and importers, this insurance can be complicated. If the shipment is not paid for yet, the seller normally takes responsibility for the cargo which means the seller pays for the insurance. However, if the cargo has been paid for before shipment, it is highly likely that the buyer assumes the responsibility for the cargo’s insurance. On the other hand, there are cases when the seller assumes the responsibility for covering the cargo but keeps coverage to a bare minimum. If the buyer isn’t happy with the bare minimum, he can opt to buy additional coverage using a Increased Value Ocean Marine policy.

You’ll Know It’s the Right Policy If It Covers:

  • Financial losses
  • Ship repairs
  • Loss or damage to cargo

What Does Ocean Marine Insurance Not Cover?

  • Passenger Ships

  • Cargo that is not in transit on a water-bound vessel

  • Temporary storage

  • Employee strikes, civil riots or commotions

  • War

  • Cost of parts for repair

  • Losses from shipping delays

How Much Does Ocean Marine Insurance Cost?

This type of insurance is almost always customized to suit the cargo and the client’s needs. Factors that are considered when determining the cost include:

  • Exposure to loss
  • INCOTERMs (a term that defines the obligations of seller and buyer when shipping goods)
  • Route risk
  • Destination risk
  • Value of cargo
  • Experience of the shipping company with the client

This type of insurance is a critical layer of protection that identifies who is financially responsible for cargo while it is in transit. Thus, it is often a non-negotiable expense when shipping goods via boat.

Frequently Asked Questions

What does cargo mean in Ocean Marine?

When it comes to Ocean Marine insurance, the products that are being haulled by the vessel are referred to as cargo. This could include anything from gasoline to toys to paper products to cars. Regardless of the value, or material it is made of, cargo is an all-encompassing word for the items being transported.

What is general average and why would I incur costs if my goods are not damaged?

If there is an emergency and a ship needs to lighten a load, one thing that can help is to get rid of some of the cargo. In an emergency situation you will not have time to determine whose cargo it is, as you have to move quickly. Once the vessel has reached safety, the cargo will need to be replaced. General average is when everyone who has cargo on the vessel is called upon to contribute to the cargo that was thrown overboard. If you are one of the lucky ones that did not have any damaged or disposed of cargo, you may still have to help provide cargo to replace what was missing.

How does marine insurance work?

Marine insurance works just like any other type of insurance policy. It will cover the damages related to a covered loss to a vessel, the cargo, and liability associated with it.

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