Marine insurance refers to a contract of indemnity. It is an assurance that the goods dispatched from the country of origin to the land of destination are insured. Marine insurance covers the loss/damage of ships, cargo, terminals, and includes any other means of transport by which goods are transferred, acquired, or held between the points of origin and the final destination.
The fundamental principles of Marine Insurance are drawn from the Marine Insurance Act, 1963* As in all contracts of insurance on property, the contract of Marine Insurance is based on the fundamental principles of Indemnity, Insurable Interest, Utmost Good Faith, Proximate Cause, Subrogation and Contribution. Practitioners of Marine Insurance must familiarize themselves with the Act and uphold these Principles when negotiating Contracts and settling claims under the contract.
1)Offer & Acceptance: It is a prerequisite to any contract. Similarly, the goods under marine (transit) insurance will be insured after the offer is accepted by the insurance company.
2) Payment of premium: An owner must ensure that the premium is paid well in advance so that the risk can be covered.
3)Contract of Indemnity: Marine insurance is contract of indemnity and the insurance company is liable only to the extent of actual loss suffered.
4) Utmost good faith: The owner of goods to be transported must disclose all the relevant information to the insurance company while insuring their goods.
5) Insurable Interest: The marine insurance will be valid if the person is having insurable interest at the time of loss.
6) Contribution: If a person insures his goods with two insurance companies, then in case of marine loss both the insurance companies will pay the loss to the owner proportionately.
7)Period of marine Insurance: The period of insurance in the policy is for the normal time taken for a transit. Generally, the period of open marine insurance will not exceed one year.
8) Deliberate Act: If goods are damaged or loss occurs during transit because of deliberate act of an owner then that damage or loss will not be covered under the policy.
9) Claims: To get the compensation under marine insurance the owner must inform the insurance company immediately so that the insurance company can take necessary steps to determine the loss.
OPERATION OF MARINE INSURANCE
Marine insurance plays an important role in domestic trade as well as in international trade. Most contracts of sale require that the goods must be covered, either by the seller or the buyer, against loss or damage.
The seller is responsible till the goods (F.O.B. Contract) are placed on board the steamer. The buyer is responsible thereafter. He can get the insurance done wherever he likes.
Free on Rail The provisions are the same as in (F.O.R. Contract) above. This is mainly relevant to internal transactions.
Cost and Freight Here also, the buyer’s responsibility (C&F Contract) normally attaches once the goods are placed on board. He must take care of the insurance from that point onwards.
Cost, Insurance & In this case, the seller is responsible Freight for arranging the insurance up to (C.I.F. Contract) destination. He includes the premium charge as part of the cost of goods in the sale invoice.
Practice in International Trade
The normal practice in export /import trade is for the exporter to ask the importer to open a letter of credit with a bank in favor of the exporter.
The terms and conditions of insurance are specified in the letter of credit. For export/import policies, the-Institute Cargo Clauses (I.C.C.) are used. These clauses are drafted by the Institute of London Underwriters (ILU) and are used by insurance companies in most of countries including India.
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