marine insurance 1. life insurance general insurance fire insurance marine insurance auto insurance...
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MARINE INSURANCE
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Life Insurance General Insurance
Fire Insurance Marine Insurance Auto Insurance Crop Insurance
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DEFINITION (CARGO, HULL, AIR WAY, TRUCK, RAIL)
Marine Insurance covers the loss or damage of ships, cargo, and any transport or property by which cargo is transferred, acquired, or held between the points of origin and final destination.
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WHY IS MARINE INSURANCE IMPORTANT?
The cargo can be damaged on exposure to a wide variety of risks
Marine insurance relieves the traders of their financial exposure from physical loss or damage to their goods while in transit
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MARINE CARGO INSURANCE
It provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.
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Though the name may indicate that the policy covers the transit of goods only by waterways, it is not so
Marine Cargo Insurance includes all forms oftransit of goods – By Road, Railways, Water & Air
Marine Cargo Insurance intends to protect the insured against the risk of loss or damage to the goods in transit
It is also called transit insurance (Overseas – Inland).
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Two Parties Insurer (Insurance Company) Insuree/Insured (Entity purchasing insurance
policy)
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INSURABLE INTEREST
A ship carrying cargo starts from India to Japan, on the way due to bad weather condition the ship meets with an accident and sinks. Who has insurable interest in the goods?
The Sellers, the buyer or the transporter?
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INSURABLE INTEREST
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Usually it is the seller’s responsibility for any loss or damage suffered by the goods until their ownership passes to the buyer
This applies to the normal sales within the country but not to export sales
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WHO CAN BUY A MARINE INSURANCE POLICY?? Contract of sale : Legal contract for exchange
of goods, services or property to be exchanged from seller to buyer for an agreed upon value
The contract of sale determines who buys the policy
The most common contracts of sale, also called Incoterms (International Commercial Terms), are :
FOB (Free on Board) C & F (Cost & Freight) CIF (Cost, Insurance & Freight)
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CONTRACT OF SALE FOB (Free on Board):
Seller is bound to load the goods onto the carrying vessel, he does not need to arrange insurance. FOB : Buyer Pays freight, Buyer arranges insurance
C&F (Cost and Freight):Same as FOB. The only difference is that the freight should be paid by the sellerC& F : Seller pays freight, Buyer arranges insurance
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CONTRACT OF SALE
CIF (Cost – Insurance – Freight):
The seller is bound to provide insurance covering the whole voyage up to the final destination CIF : Seller pays freight and seller arranges the insurance
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In marine cargo insurance, the person having insurable interest at the time of loss can only recover
Marine cargo policies are freely assignable. Unlike other policies, there is no need to take insurance company’s consent for transferring policy to new buyer
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Marine policies are Valued Policies
The sum insured is negotiated between the insured and the insurer
i.e., the value is agreed upon and claims are settled on the basis of proportion to the agreed value and not on the market value or reinstatement value basis
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MARINE CARGO INSURANCE
Provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air
Consignments by rail, road etc Export & import shipments Coastal shipments Shipments by inland vessels or country craft
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Marine Cargo insurance provides;
(1) Coverage of goods during Overseas Transit (2) Coverage for goods Inland Transit
Marine insurance cover starts right from the moment the goods leave the point of start and remain continuously in force during transit and until the goods reach the destination.
Marine Insurance(Risk Coverage, Period, Number of Voyage, Insurable Interest)
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TYPES OF MARINE CARGO
Overseas TransitOpen CoverSpecific Policies
Inland TransitOpen PolicySpecial Declaration PolicyAnnual Policy
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OVERSEAS TRANSITOPEN COVER
Large Export/ Import oriented Industries usually prefer Open cover agreement, as they have to make numerous regular shipments who would otherwise find it very inconvenient to obtain insurance cover separately for each and every shipment.
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OVERSEAS TRANSITOPEN COVER A marine cargo open cover policy is an
agreement between a merchant and an insurance company to insure all goods in transit within the agreement, until either party cancels the agreement
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OVERSEAS TRANSITOPEN COVER-FEATURES An Agreement is made for a specific
period, generally 12months
Rates, Terms & Conditions are agreed to in advance by both the parties
Premium is paid in advance for the projected exports to be made
Details of all shipments should be declared by the insured
Agreement ceases on expiry of period or when sum insured gets exhausted whichever occurs first.
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OVERSEAS TRANSITSPECIFIC POLICES Specific Policies:
This agreement or policy is usually issued for one time transit of cargo
Covers only particular consignment. Insurance on case to case basis. To be arranged before commencement of
transit
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INLAND TRANSITOPEN POLICY A manufacturer who in a year has many
consignments for transportation, can take an open policy for the entire year instead of individual policy.
Open Policy is commonly used for dispatches within the country by rail, road, air, inlandwaterways and registered post parcels.
It is also known as the floating policy.
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INLAND TRANSITOPEN POLICY The policy term is one year Policy issued for a substantial sum insured
based on the projected value of dispatches Declarations are made for each dispatch Policy ceases on expiry of policy term or
when sum insured gets exhausted whichever occurs first
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INLAND TRANSITSPECIAL DECLARATION POLICY Special Declaration Policy is a Form of Open
policy for those with large turnover and frequent dispatches by inland transit via Rail, Road, Air, Inland waterways and post parcels
Minimum estimated dispatches for an year should not be less than 2 crores
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INLAND TRANSITANNUAL POLICY
Annual Policy:
This policy covers transit of goods from plant/ warehouse of origin to the buyer’s plant/ warehouse.
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Sum Insured will represent the maximum value of risk that may encounter during transit
In case of more than one transit, sum insured would be sum total of the aggregate maximum estimated value at risk in transit at any given point of time
Rating would depend on:- Distance involved- Single carrying limit- Turnover
No declarations are required
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SOME OF THE PERILS THE CARGO MAY COME ACROSS ARE;
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TYPES OF PERILS
SEA PERILS (Act of God – natural calamities etc.)
EXTRANEOUS PERILS (Faults with loading, Breakage, Leakage)
WAR PERILS (War, Rebellion etc.) STRIKE PERILS (Strike, Lockout etc.)
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LOSSES FROM THE PERILS
TOTAL LOSS Actual Total Loss ((Total Damage +Repair Cost)
=> Total Property Value) Constructive Total Loss ((Total
loss+Repair+Salvage)=> Total Property Value PARTIAL LOSS (AVERAGE)
General Average Particular Average
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CARGO CLAUSES Institute Cargo Clauses are standard terms and
conditions which are used internationally
Drafted by the Institute of London Underwriters & are internationally accepted
Cargo insurance is usually provided by means of ICC - A, B or C, plus War Clauses and Strikes Clauses
These clauses define the Terms of Cover for Export-Import Cargo
Marine Cargo Policy is NOT complete unless the related Clause is attached to it
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OVERSEAS TRANSIT CLAUSESINSTITUTE CARGO CLAUSE( C )
Fire or Explosion Vessel or craft being stranded, sunk,
grounded or capsized (Overturn) Overturning or derailment of land conveyance
(Rail/lorry) Collision or contact of vessel/craft or
conveyance withany external objects, other than water
Mishap at the time of discharge of cargo at Port of distress
General Average (When the entire venture is in danger, in order to save the Ship and Cargo, certain sacrifices are made and/or certain expenses are incurred)
Jettison (Throwing of cargo from above board the ship to save the vessel and/or other cargo)
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OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( B )
ICC C + Earthquake, volcanic eruption,
lightning. Washing overboard (can be due to sea
water/wind/bad weather)
Entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift van or place of storage
Total loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel or craft
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OVERSEAS TRANSIT CLAUSES INSTITUTE CARGO CLAUSE ( A )
All Risk Cover Except the specific exclusions
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COVERAGES – ICC A, B, C
Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)
Fire or explosion Covered Covered Covered
Vessel or craft being Stranded, grounded, sunk or capsized.
Covered Covered Covered
Overturning or derailment of land conveyance.
Covered Covered Covered
Collision or contacts of vessel with any external object other than water.
Covered Covered Covered
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COVERAGES- CONTD.
Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)
Discharge of cargo at port
Covered Covered Covered
Earthquake, Volcanic eruption or lightning.
Covered Covered Not Covered
General Average Sacrifice Covered Covered Covered
Jettison Covered Covered Covered
Washing Overboard Covered CoveredNot
Covered
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COVERAGES – CONTD.
Risks I.C.C.(A) I.C.C.(B) I.C.C.(C)
Entry of sea, lake or river water into the vessel
Covered Covered Not Covered
Total loss of any package lost overboard – loading, or, unloading from vessel or craft.
Covered Covered Not Covered
Any other risk not specifically excluded - ALL Risks
Covered Not Covered
Not Covered
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CORRESPONDENCE BETWEEN ICC & COVERAGES
ICC C – Free of Particular Average ICC B - With Particular Average ICC A - All Risks