One of the oldest types of cover in the world, marine insurance that we know today was born in the 1600s out of merchants’ desire to protect themselves from the heavy losses they could face in an age when shipping was a very dangerous venture. While some industry risks went out with the wooden ship, today those involved with the movement of goods (not just vessel owners) still face a large amount of risk, making marine insurance just as important as ever.
Over time, marine insurance has expanded to provide more and more loss protection. These days it’s not just a single cover, but a group of covers that address the various exposures for those involved with the movement of goods.
Freight Liability Insurance
Freight Liability Insurance provides legal liability protection for the loss and damage of goods in accordance with standard trading conditions, international conventions, statues and liability at common law and can include Liability incurred for Errors and Omissions. It can also be extended to include cover for contracts which require increased or enhanced levels of liability.
Marine Cargo Cover
Cargo that is in transport, whether that be by air, road, rail, or sea can be covered for physical loss and damage through a marine cargo policy. Policies can be taken out for individual shipments or cover any shipments made during the policy period.
Marine Hull and Machinery Cover
Hull insurance provides cover for physical damage to a vessel and any of its operating equipment and machinery. Any vessel, not just ocean-going commercial crafts, can benefit from the cover. Tugboats, barges, other miscellaneous floating equipment and even some fixed properties, including offshore oil rigs and similar installations, can be candidates for hull insurance.
But what about underinsurance?
You’ve got an insurance policy in place, so you don’t need to worry about underinsurance, right? Well, did you know that if you exceed your limit a mechanism called “Average” may apply… which means you can’t claim “up to” your policy limit… Your claim payment could actually be proportionately less. For example, say you underinsured your risk by 30%, your claim payment would be 30% less than your limit!
What does it all mean? Establishing adequate limits is vital no matter what type of policy.
Establishing limits under a Marine Cargo Insurance policy can be a relatively simple process. These are generally based on the value of goods being shipped or stored, however, all policies should contain a section detailing the basis of valuation, so you are able to set the limit(s) that meet your maximum requirement.
Whereas, freight liability policy limits are usually worked out on weights against contractual conditions, it is easy to underestimate the amount your policy needs to cover and it’s easy to overlook trading conditions and conventions that need to be taken into consideration.
For example, BIFA, the prime trade association for UK registered companies engaged in the international movement of freight by all modes of transport, accept liability for loss/damage to goods at 2 SDR’s (Special Drawing Rights) per kilo, currently valued at approx. £2,170 per tonne. If you weren’t ever going to have more than 100 tonnes of cargo in one place at any one time, the liability exposure would be £217,000 (100 tonnes x £2,170).
Moving goods outside of the UK in areas where conventions apply is something to be aware of when it comes to underinsurance. BIFA terms and conditions can be superseded by conventions (international law) so ensuring your limit(s) cater for this is also vital.
Navigating the correct conditions for your marine and freight insurance can be tricky. We have a team of highly knowledgeable experts here ready and waiting to help you: 01628 532613 marine@macbeths.co.uk
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