Types of Marine Insurance Policies

Types of Marine Insurance Policies

Although marine insurance policies are generally similar in structure, they differ in terms of execution, risk coverage, and operational scope. From a coverage perspective, marine cargo insurance is commonly divided into three principal categories:

• Coverage Type A.
• Coverage Type B.
• Coverage Type C.

These insurance methods are widely recognized in international trade and have been standardized by international insurance associations as general cargo insurance conditions.

Marine Insurance Coverage Methods

Marine insurance coverage is classified into three primary levels, each providing different degrees of protection.

Coverage Type C

Coverage Type C is commonly known as minimum coverage and includes protection against the following risks:

• Explosion.
• Fire.
• Grounding of the vessel.
• Sinking.
• Capsizing.
• Derailment or malfunction of loading or unloading conveyor systems.
• Collision or contact with external objects.
• Discharge of cargo at a port of refuge.
• General average loss.

Coverage Type B

Coverage Type B includes all risks covered under Coverage Type C and extends protection to additional risks, including:

• Earthquake.
• Volcanic activity.
• Lightning.
• Cargo loss caused by heavy sea waves.
• Water ingress into the vessel.
• Total loss of cargo during loading or unloading operations.
• Malicious damage.

Coverage Type A

Coverage Type A is commonly referred to as comprehensive marine insurance and provides the broadest level of protection by covering most maritime risks. However, cargo owners should carefully review policy terms, as certain risks such as war, strikes, or civil disturbances are often classified as special risks and require additional coverage endorsements.

Classification of Marine Insurance Policies by Application

Marine insurance policies may also be categorized based on their operational function. Some policies apply specifically to vessels, while others may cover cargo, freight, or multiple maritime interests. Major categories include:

• Voyage insurance.
• Time insurance.
• Combined voyage and time insurance.
• Builder’s risk insurance.
• Port risk insurance.
• Valued insurance.
• Unvalued insurance.
• Open cover insurance.
• Floating insurance.

Voyage Insurance

Voyage insurance provides coverage for risks associated with transportation between specified points of departure and destination. For example, cargo transported from Bandar Abbas to Hamburg or Liverpool, and vice versa, may be insured under a voyage policy. This type of insurance is most commonly used for cargo insurance and, less frequently, for freight insurance. It is rarely used today for hull insurance.

Time Insurance

Time insurance provides coverage for maritime risks over a specified period, regardless of the vessel’s route or destination. This policy type is frequently used for insuring vessels and maritime operations.

Combined Voyage and Time Insurance

Combined insurance policies provide coverage for both a specific voyage and an additional agreed period after the vessel reaches its destination. Such policies often cover the vessel’s hull, equipment, and associated maritime risks.

Builder’s Risk Insurance

Builder’s risk insurance covers risks associated with ship construction. Coverage typically begins from the commencement of shipbuilding activities and continues until completion of sea trials and delivery of the vessel to its owners.

Port Risk Insurance

Port risk insurance provides protection for vessels during periods when they remain stationary at a port. This policy covers risks specific to port environments that differ from navigation-related maritime risks.

Valued Insurance

Valued insurance establishes a predetermined agreed value for the insured property. The agreed value may not necessarily reflect the actual market value, but serves as the basis for determining insurance compensation.

Unvalued Insurance

Unvalued insurance does not specify the value of the insured property at the time of policy issuance. The insurable value is determined later, usually based on agreed calculations or documentation. This type of insurance is commonly used for freight insurance. In freight insurance, the insurable value generally includes gross freight earnings, insurance costs, and any associated financial risks assumed by the insured.

Floating or Open Cover Insurance

Floating insurance, also known as open cover insurance, provides long-term protection for cargo shipments under continuous or multiple shipping contracts. It is commonly used by businesses that regularly transport goods by sea.

Frequently Asked Questions About Types of Marine Insurance Policies