Shipping is still a huge part of international trade, despite being exposed and vulnerable to a lot of risks. Even at this modern age, the shipping industry still needs to deal with age-old concerns, such as natural calamities, piracy, geopolitical issues, and regular wear and tear of machinery and ships.
That said, there are numerous types of marine insurance policies, including hull and machinery insurance, cargo insurance, and all other types of insurances that cover different aspects of shipping operations. But with insurance come policies that govern them.
Knowing these different policies is just as important as knowing the various marine insurance types. So, whether you’re an owner of a shipping agency or a customer of one, it’s best to know the following basic policies to learn what the insurance covers:
This covers the risks from the port of origin to the port of destination. That said, the policy ends when the ship reaches its destination and is usually for insurance covering the cargo.
This policy covers a particular period. This is often applicable to full insurance and is usually taken by ship owners for their operations. Normally, time policies are issued for a year and can be extended until a ship’s voyage is completed; however, not all countries allow for extensions or issuance of more than one year (such as India).
A mixed policy is a combination of both time and voyage policies. That said, a ship can be insured for a particular period and voyage. For example, a ship is insured for its route from Hong Kong to Rotterdam in a span of one year. This policy is often issued to particular shipping routes.
This policy entails the declaration and agreement of a value/amount to be paid for in case of loss. There would be no disputes or negotiations as to the amount to be compensated later on (during the event of the loss), as it is decided upon the drafting and agreement of the insurance. Normally, ships are insured with this type of policy.
This policy means that a value is not decided upon the time the policy is taken up or agreed upon. This is when the value of the subject matter (either the ship or the cargo) is not declared, and the value would be determined when the loss occurs.
A floating policy covers several shipments and is often used for habitual (or regular) suppliers of goods to avoid taking a separate policy for every shipment.
A block policy covers all the risks and loss from land and sea (not only the ports but the land transportation as well). This policy is often used by gold buyers to insure gold as it travels from its port of origin to its destination port, and even the road or railways it travels to reach its final destination.
Wager or Honor Policy
Simply put, this policy has no fixed terms or amounts and is held by those who have no insurable interest in the subject. As such, the person would “wager” with the underwriter.
Named or Specific Policy
A named policy is one that insures a specific ship, wherein the name of the ship (and sometimes even the value/amount of the cargo) is mentioned.
A composite policy is undertaken when there is more than one underwriter, and each underwriter’s obligation is determined and fixed.
Single Vessel Policy
This policy covers the risks of only one insured vessel.
In contrast to single-vessel policy, this policy covers the whole fleet of ships for a specific period.
This covers all risks of the vessel as it is docked in a port for a particular period.
A blanket policy provides maximum protection and covers all risks. In this policy, there is a maximum amount determined to protect the vessel and its cargo.
As mentioned earlier, the shipping industry is exposed to a considerable amount of risk, which is covered by all types of marine insurance. Whether it’s your ship or the cargo that’s involved, it’s important to know the different policies to maximize your insurance. But if you’re in doubt or wish to know more for your ship or your cargo, you can always call your local marine insurers.