What is marine insurance?
How institute clauses and other contractual provisions affect the level of insurance cover for your shipments.
You can cover the risk of loss or damage to your goods with marine insurance. This can cover the whole journey - over land as well as sea. The most common form of marine policy in the UK is that used by Lloyd's of London. In addition to a basic contract form, various clauses can be added to provide coverage that best suits your business needs and trading patterns.
Institute 'A' clauses
These provide the most coverage to traders at the highest premium (price). They cover practically all risks - except, for example, wars and strikes. These can, however, be reinstated by including appropriate clauses.
Similar clauses are used for movement of goods by air.
Institute 'B' and 'C' clauses
These provide coverage for a number of risks on a 'reasonably attributable' basis - meaning responsibility for damage or loss can be reasonably attributed to a particular party. Less coverage is provided under the 'C' clauses, but the price is lower.
General average
A standard marine insurance policy covers claims under general average. This applies when some cargo is lost or damaged through efforts to salvage a ship in distress. It provides for all cargo owners to collectively compensate whoever of them loses out in such circumstances.
Acts of God and acts of war
Under international law, transport carriers aren't liable for acts of God, ie unforeseen acts of nature such as lightning - or acts of war or civil unrest. Piracy, which is very common in some waters, is also considered an act of war. If you send goods to a region where piracy is common (eg some of the waters off Indonesia and the Republic of the Philippines), it would be prudent to consider additional coverage. If you want cover for acts of God or for acts of war, make sure you inform your broker.
Terrorism
Acts of terrorism are usually excluded - cover has to be bought for an additional premium.
Excess and franchise
Some policies include either an excess or franchise clause. Excess represents a predetermined amount that is deducted from a claim and is used to discourage irresponsible, malicious and small claims. Franchise means a percentage of the value of a loss, below which no payment is made but above which total compensation is paid.