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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.
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:
Getting into details...
This happens when cargo is lost while in transit. Example: An oil spill or a collision that causes a container van to fall overboard.
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.
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.
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.
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.
This occurs for different reasons: negligence, weather, or lack of training
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:
Generally speaking, the limit of this insurance type will be based on the valuation formula of the provider on the cargo.
This insurance will come in handy if you are in the business of:
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.
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.
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:
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.
This insurance provides a business with protection should a mistake have been made while delivering professional services. Your General Liability policy will not provide you with this level of protection, so if your company gives advice or provides contracting services you may need this insurance.
The directors and officers of a privately-held company are at risk from customers, competitors, suppliers and government agencies. However, the greatest number of lawsuits against directors and officers come from the employees of a company itself. Directors and Officers Insurance covers your management team, should things go south. You’ll often find D&O packaged with EPLI.
EPLI is a liability insurance that covers wrongful acts, such as wrongful termination, discrimination, sexual harassment and retaliation. This insurance may also protect your business from other employee-related claims, such as deprivation of a career opportunity, defamation, invasion of privacy, failure to promote, and negligent evaluation.
This insurance protects goods in transit on land, as well as the property of others that is on your premises or being transported from your premises. An Inland Marine policy is crucial if your business ships goods of any kind on land.
This insurance covers a business should they need to recall one of their products. Product Recall Insurance will cover the cost of getting a defective product back under the control of the manufacturer or merchandiser that would be held responsible for bodily injury or property damage due to the existence of the product.
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