Why businesses need marine insurance
Marine insurance is a contract of indemnification against marine losses incidental to the daily operations of running such a business. It protects the owners of cargo, vessels and third parties against loss of capital investments.
High value assets such as marine equipment and machinery need comprehensive insurance to safeguard future business. Full disclosure of material facts and circumstances are required by the insurer when marine insurance is requested. A true representation of all material facts is of vital importance for accurate risk management and the corresponding comprehensive cover.
Who needs marine insurance?
It is essential for businesses engaging in international trade, especially heavy-duty cargo shipping. Basically, all businesses that have an insurable interest in cargo or vessels need marine insurance.
Import and export businesses need cover to protect their goods, ideally from the point of departure to the final destination. Financial institutions are more likely to provide finance to businesses in this category, knowing they are protected with comprehensive marine insurance and that the transporting vessels meet specific sea and road-worthy standards, a compulsory requirement for comprehensive cover.
Marine insurance is not only restricted to cargo transported across water; it also includes all forms of freight transportation such as goods travelling by road, rail or air.
What is covered?
Marine insurance covers cargo in transit, including inland transportation. It also includes cover for freights carried to and from locations abroad via land, air or sea. General cargo, usually shipped in containers, requires standard comprehensive cover but specific cover is needed for specialised cargo such as perishable commodities. Insurance requirements are dependent on the conditions of sale or purchase.
Common marine hazards
Cargo in transit is subject to many hazards during its journey; the most common hazards are:
- Motions of the vessel such as rolling, pitching, heaving, surging and swaying
- Wave impact such as water moving over the bows
- Other marine perils such as sinking, stranding or collision of the carrying vessel
- Coupling impact during shunting operations
- Trans-shipping where goods are shipped over international borders, it requires off-loading and reloading due to different track gauges
- Total loss of aircraft
- Temperature extremes
- Theft: Goods consolidated at airports and delays in shipments can increase risk exposure to theft
Other hazards include road hazards, handling and stowage hazards, water damage, theft, pilferage, contamination, fire, etc. Freight businesses can be affected by acts of God and uncontrollable external elements and therefore require marine insurance to ensure business continuity when these risks and hazards strike.