A Guide to Understanding Marine Cargo Insurance

 Insurance is an indispensable condition and an integral part of the international cargo purchase business. The largest volume of business and the widest coverage is marine cargo insurance.

The marine cargo insurance clauses are divided into two categories: basic insurance and additional insurance.

Marine Insurance Coverage

Basic insurance

Basic marine cargo insurance is a mandatory part of marine cargo insurance.

There are two types of basic insurance: general cargo insurance and special cargo insurance.

The general cargo insurance is divided into three types: safety insurance, water damage insurance and all risks.

The special cargo insurance is divided into two types of insurance, namely, loading and unloading tung oil insurance and refrigerated cargo insurance.

In the two categories of five types of insurance, the policyholder must choose one of them as the basic insurance according to the characteristics of the goods and transportation conditions.

On this basis, the policyholder can choose some additional insurance if he/she wants. The insurance contract without the basic insurance is invalid.

(1) Safety insurance

This insurance is responsible for compensation for the insured goods in transit due to severe weather, lightning, tsunami, earthquake, flood natural damage caused by the entire batch of goods or presumed total loss. When the insured person claims the presumed total loss, the damaged goods and their rights shall be entrusted to the insurance company. If the insured cargo is transported to or from the vessel by barge, each barge load is considered as a whole lot. Presumed total loss means that the actual total loss of the insured cargo is unavoidable or that the cost of restoring or repairing the damaged cargo and transporting it to its original destination exceeds the value of the cargo at that destination.

Total or partial loss of cargo due to accidental damage to the means of transport, reefing, sinking, collision with drifting ice or other objects, as well as fire and explosion.

In the case that the means of transport has been stranded, reefed, sunk, burned accident, the goods before and after the sea suffered bad weather, lightning and tsunami and other natural fire damage caused by part of the loss.

All or part of the loss caused by one or several whole pieces of goods falling into the sea during loading, unloading or transit.

Loss caused by unloading at the port of refuge after a shipwreck and special expenses incurred for unloading, storage and delivery of goods at the port of transit and port of refuge.

Reasonable expenses incurred by the insured for measures to salvage, prevent or reduce damage to the goods subject to the perils of the insured's liability, up to the amount of insurance for the salvaged goods.

Sacrifice, apportionment and salvage costs of common marine loss.

The contract of carriage contains the clause of "mutual collision liability", according to which the cargo shall reimburse the ship for the loss.

(2) Water Damage Insurance

This insurance is responsible for compensating Losses and expenses of the above-mentioned safety insurance

The insurance is responsible for partial loss of the insured cargo caused by natural disasters such as bad weather, lightning, tsunami, earthquake, flood, etc.

Water damage insurance is generally applicable to goods that are not easily damaged or not affected by rust, such as hardware materials, old automobiles, machinery, machine tools, bulk metal materials, etc.

(3) All risks

The scope of liability of this insurance. The insurance covers the loss and expense of the above-mentioned safety insurance and water damage insurance.

It is responsible for the total or partial loss of the insured goods in transit due to external causes.

(4) Bulk tung oil insurance

Insurance for bulk tung oil transported by sea is a kind of marine cargo transportation insurance specifically taking bulk tung oil as the subject matter of insurance. It covers the loss caused by natural disasters or accidents within the scope of insurance during the transportation of tung oil in bulk by sea.

(5) Reefer Cargo Insurance

Marine transportation refrigerated cargo insurance is specially applicable to refrigerated cargo of marine cargo transportation insurance. China's insurance companies to open the marine transportation of refrigerated cargo insurance is based on the People's Insurance Company of China in January 1, 1981 revised terms of marine transportation of refrigerated cargo insurance.

The specific content includes: marine transport refrigerated cargo insurance is divided into refrigerated insurance and refrigerated all risks. Their insurance liabilities are water damage insurance and all risks in general cargo insurance plus corruption or loss caused by refrigerated machinery stopping working for more than 24 hours.

(6) Exclusion of general cargo insurance

Regardless of peace of mind insurance, water damage insurance or all risks insurance, according to the provisions of China's marine cargo transportation insurance, the insurer is not liable for the following losses and expenses.

1) Losses caused by the intentional acts or negligence of the insured

2) Losses caused by the consignor.

3) Losses caused by poor quality or shortage of quantity of the insured goods which existed before the commencement of the insurance liability.

4) Losses or expenses caused by natural wear and tear, essential defects and characteristics of the insured goods, as well as by fall in market value and delay in transportation.

5) The scope of liability and exclusion of liability under the war risk clause and strike risk clause of marine transportation cargo.

Since all the above exclusions are based on the subjective fault of the insured, potential defects of the goods themselves and losses caused by inevitable consumption in transit, the insurer excludes these risks from the coverage.

Additional Insurance

Additional insurance covers losses caused by external risks and can be divided into general and special riders, which correspond to general and special external risks respectively.

Rider insurance cannot be insured separately, but can be added to the basic insurance and one or more of them according to the freight needs. After taking out an all risks policy, you only have to choose to take out a special additional insurance policy because all general additional risks are included in the all risks policy.

(1) General additional insurance Classification:

1) Theft, Cargo Inability Insurance

2) Fresh water and rain

4) Staining

5) Leakage insurance

6) Damage and broken insurance

7) Smell insurance

8) Moisture and heat insurance

9) Hook damage insurance

10)Package damage insurance

11)Rust damage insurance

(2) Special additional insurance

It is not included in the scope of all risks. No matter the insured takes any basic insurance, in order to obtain the insurance coverage of the insurer for political risks such as governmental acts, it must be specially agreed with the insurer and specially agreed by the insurer. Otherwise, the insurer will not be liable for this insurance.

Special Additional Coverage:

1) Non-delivery insurance

2) Import duty insurance

3) Deck Cargo Insurance

4) Rejection insurance

5) Aflatoxin insurance

6) War and strike insurance

From STU Supply Chain: A Guide to Understanding Marine Cargo Insurance