Marine insurance is a contract of insurance under which the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. The insured pays the premium in consideration of the insurer’s (underwriter’s) guarantee to make good the losses arising from marine perils or perils of the sea.
Marine perils can be collision of ship with the rock, fire, ship attacked by the enemies, etc. These perils cause damage, destruction or disappearance of the ship and cargo and non-payment of freight. Through marine insurance policy, the insurer undertakes to compensate the owner of a ship or cargo for complete or partial loss at sea.
Essential elements of Marine Insurance Contract
· It is based on the principle of indemnity
· The contract is based on utmost good faith.
· The insurable interest must exist at the time of loss.
· The principle proximate cause will apply to marine loss only.
The three different types of marine insurance policies are:
When a ship is insured against any type of danger, it is known as hull insurance. This policy is taken to indemnify the insured for losses caused by damage to ship.
When a marine insurance policy is taken by the cargo owner to be compensated for loss caused to his cargo during the Voyage, it is known as cargo insurance. The cargo to be transported by ship is subject to many risks, like risk of theft, loss of goods in voyage, etc.
When a marine insurance policy is taken to guard against non-recovery of freight, it is known as freight insurance. The shipping company is mainly interested in freight, which it gets either in advance or on the arrival of goods. However, it will not get the freight, if the goods are lost during transit. So, to insure the freight, it takes freight insurance.
A contract of marine insurance covers the ship, cargo and the freight.