Fortunately, in most of the cases, exported goods successfully make their overseas journey and arrive safely at the destination. However, you can’t still ignore such occasions when things don’t go as per the plan,likegoods damaged during transit or worse, not arrive at all.
The importance of marine insurance has increased more than before in today’s age of globalisation. While the international trade opens up many business avenues, it also comes with its risks. Therefore, marine insurance policy plays a crucial role in facilitating the global trade by offering financial coverage to minimise the risks thereof.
While taking a marine insurance for your export-importbusiness, it is essential to get yourself acquainted with its basics. A complete understanding of the marine insurance basics is necessary to make the proper use of the policy. So, let’s start -
1. Go for agreed value marine insurance policy instead ofactual cash value - The agreedvalueis the fair market value of a vessel which is pre-decided by the policyholder and the marine insurance company, at the time of the policy issuance. In the event of total loss, your marine insurance policy with an agreed value would pay the value as mentioned in the policy document, without deducting depreciation.
Moreover, the policy which has an actual cash value valuation would apply depreciation before making a payout at the time of loss. It means, you would get less than what is shown on your marine insurance policy, and therefore, it makes sense to go with an agreed value insurance policy.Note, agreed value insurance policy would charge more premium as compared to the actual cash value.
2. Opt Between All Risk Vs. Specified Perils Marine Insurance Policy - Here, the all-risk policy offers coverage for all the losses unless the same has been specifically excluded from the policy. The specified peril policy offers coverage only if the losses happen due to specific losses as stated in the marine insurance policy document. It means, if you have bought an all-risk marine insurance policy, the insurer will offer you coverage against any loss or damage which arises due to perils unless those risks are specifically excluded from the policy.
3. Check Navigation Limits - It is that part of the marine insurance policy which clearly states where your vessel will navigate. The insurance company can refuse to settle the claim if losses happen outside the navigational limits as stated in the policy document. It is essential to check that whether your marine insurance policy has specified navigation limits or not. For instance, you have got a contract of exporting engineering items to a buyer situated in Sri Lanka via Chennai.
However, instead of following the navigation limit as stated in the policy document, your ship takes the different route, and unfortunately, losses occur on the new route. In this case, the marine insurance company has all rights to reject the claim.
4. Know About Deductible - It is the amount of loss that a policyholder needs to pay before the marine insurance company settles the claim. Premium amount may go up or down depending upon the deductible amount. The higher the deductible, the lower would be the premium and vice versa. So, you can choose the deductible to lower your insurance premium. However, make sure the deductible is the amount which you can easily afford at the time of claim.
5. Ensure the safety of vessel - Just because you have a marine insurance policy, it doesn’t mean you can act carelessly. You can’t rely on your marine insurance company to cover those losses or damages which arise due to your fault. If you fail to keep and maintain your vessel or equipment, the insurer may reject your claim.
6. File marine insurance claim properly - Just because you have a marine insurance, it doesn’t guarantee that the insurer will settle the claim. If you submit the claim under thewrong policy, make a mistake in the assessment or simply make a typo error while filling the claim form, the insurer can reject your claim.
Every exporter or importer should have a proper understanding of the basicswhich are involved in a marine insurance policy to make the optimum use of the policy. By simply knowing what to look for and what are the basics of marine insurance, you can easily navigate through the legal language of today’s marine insurance policies and get a good deal.
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