15 Essential Marine Insurance Terms You Must Know

Understanding marine insurance is necessary for protecting goods during transit. Whether you are shipping across oceans or moving cargo through different modes, a marine insurance policy offers security against various risks.

In India, marine insurance is often paired with inland transit insurance to provide end-to-end protection for valuable commodities. It covers goods and cargo transported within the country’s boundaries. Let us explore 15 key terms in marine insurance so that you get all the benefits.

15 Most Common Terms in Marine Insurance Policy

1. Actual Cash Value

Actual Cash Value (ACV) is the current value of your goods at the time of loss or damage. Insurers consider the item’s age, condition, and depreciation to decide the ACV. If your cargo gets damaged, the company will not pay the original purchase price. Instead, they will pay the depreciated value.

2. All-Risk Cargo Insurance

All-risk cargo insurance provides the broadest protection for your shipments. This type of marine insurance policy protects your goods against almost every risk, except those specifically excluded in the policy. If you want peace of mind while transporting high-value items, you should opt for all-risk cargo insurance from top insurers like TATA AIG. Always check the policy wording for any exclusions.

3. Bill of Lading

The cargo shipping company issues a Bill of Lading when it receives the cargo from the shipper. It serves as a receipt or a contract of carriage, and sometimes as a title to the goods. You will need the bill of lading for claiming insurance or proving ownership.

4. Certificate of Insurance

A Certificate of Insurance proves that your cargo is covered under a marine insurance policy. The insurer issues this certificate when you buy a policy. You need to show this document to customs, banks, and other authorities if needed. It contains details such as policy number, coverage, and insured amount.

5. Policy Period

Policy Period refers to the duration for which your marine insurance policy is valid. Insurers mention the exact dates in the policy document. You must make sure your shipments fall within the policy period. If your goods are in transit outside the coverage dates, you may not receive any compensation for loss or damage.

6. Premium

Premium is the amount you pay to the insurance company for your cover. The insurer decides the premium based on the risk factors, value of goods, and coverage chosen. Some businesses choose marine insurance along with an inland transit insurance cover to ensure protection against losses or damages to cargo during domestic transit. You must pay the premium based on your coverage and on time to keep the marine insurance policy active. 

7. Sum Insured

Sum Insured is the amount (maximum) you will receive from the insurer for a covered loss. You must declare the correct value of your cargo while buying the marine insurance policy. If you understate the value, you may get a lower claim amount. If you overstate, you may pay a higher premium unnecessarily.

8. Co-Insurance

Co-insurance is a situation where more than one insurer shares the risk. If your cargo value is high, you may see co-insurance clauses in your policy. This arrangement reduces the risk for each company. When you make a claim, all co-insurers will contribute according to their share.

9. Concealed Damage

Concealed damage means any damage to your cargo that you cannot see at the time of delivery. Sometimes goods appear fine on the outside, but you discover damage later when you unpack them. You must report concealed damages immediately to the insurer for claims. 

10. Declaration of Insurance

A Declaration of Insurance is a statement made by you, the policyholder, about the cargo to be insured. You declare details such as the type of goods, value, and destination. The insurer uses this information to issue your marine insurance policy. 

11. Inherent Vice

Inherent Vice means a natural property of the goods that makes them prone to damage. Some items, like fruits or chemicals, can spoil, corrode, or decay by themselves. The majority of the policies exclude losses that occur due to inherent vice. You must know if your commodity is prone to such risks.

12. Insurable Interest

Insurable Interest is your legal right to insure the goods because you stand to lose financially if something happens. If you do not have an insurable interest, you cannot make a claim. For example, exporters, importers, and banks involved in the transaction have an insurable interest.

13. Peril of the Sea

Peril of the Sea covers unexpected and accidental events at sea, such as storms, shipwrecks, and rough waves, that cause damage to your cargo. A marine insurance policy generally mentions “perils of the sea” as covered risks. 

14. Salvage

Salvage means the process of saving cargo or property after a marine accident. If a shipwreck happens, professional salvors may recover some goods. The insurer may pay for salvage operations. Sometimes, you may recover a part of your loss through salvage and claim the balance from your insurer.

15. Subrogation

Subrogation is the right of the insurer to recover the amount paid to you from a third party who is responsible for the loss. If someone else’s negligence causes your loss, the insurer can take legal action on your behalf.

Conclusion

Understanding the marine insurance terms will help you manage your shipping risks better. Whether you are an exporter, importer, or logistics company, you must stay informed. Next time you review a marine insurance policy or transit insurance, you will feel more confident. If you ever have doubts, ask your insurer for clarity. A well-informed customer always gets better results in global trade.