Marine Insurance: The Basics

What one needs to understand and remember is, if you are shipping goods abroad for export or import or even across the country, marine insurance offers protection against a number of worst case scenarios. The sad thing in todays market is that marine insurance is one of the most misunderstood forms of business insurance on the market.
Marine insurance in the modern day market:

Shipping methods have changed to meet the needs of business owners and their customers. Today business owners can insure their property two ways:

1. As waterborne cargo (called "wet" marine)
2. As land transported cargo (called "dry" marine)

Most small business owners (SME’s) exposure to marine insurance is limited to inland marine insurance. This is a category of marine insurance that protects cargo that not transported by sea but instead, is shipped via domestic transit.

The reason inland marine insurance is important is because cargo typically changes hands many times during the course of shipment, thus increasing the risk at every stage. Therefore if anything does go wrong then who is to blame? Without an inland marine policy, the merchant could easily sustain a property loss for which no one can clearly be held accountable.

There are two types of inland marine policies:

1. Filed Policies

Filed inland marine policies derive their name from the fact that the forms and rates are filed with the state insurance department. These policies usually cover direct physical loss of property and feature insured parties with similar loss exposures.

2. Non-Filed Policies

These polices are not filed with the state insurance department and feature a fewer number of insured parties with varying levels of exposure to loss. Most policies insure against direct physical loss or damage, but many policies will only provide coverage against specific causes of loss. Since these policies are highly-customizable, virtually any type of cargo can be covered under a non-filed policy.

Deductibles & Limits

As with any insurance policy, inland marine policies almost always require the insured party to pay some sort of deductible, assessed on a per occurrence basis. Deductibles are not standardized, so you will need to carefully consider deductible amounts when comparing inland marine policies. You will also need to exercise care in reviewing the language used to describe the deductible since marine insurers are notorious for using non-typical language to limit their liability.

Like other insurance policies, inland marine policies will also be governed by a policy limit. Assessing the limit can be tricky since it can be determined on either a per conveyance or per occurrence basis. If the language seems unclear, consult your broker for more information