Marine vessels such as boats and ships are subject temperature changes and weather disturbances. But aside from those, there are other reasons boat owners and shipping companies need to insure their investments.
There are different types of marine insurance in terms of coverage, an example of which is the liability insurance for charterers. Any type of marine insurance is definitely better than taking a risk, as there are many hazards, as listed below.
Natural Hazards
Many weather disturbances start from the sea, and that is why the sea vessels are at greater risk than their land counterparts. Despite the developing technology of shipbuilding, man’s best seafaring creations are not a match for Mother Nature, as the Titanic has proven.
With satellite technology and global navigation systems, weather disturbances are more easily tracked, but incidents such as underwater earthquakes and tsunamis are still unexpected.
Cargo Theft Incidents and Piracy
Cargo theft incidents are rising in Canada and other territories as part of an organized crime ring. The worldwide numbers have reached $5 billion.
There are also numerous reports of piracy in the high seas with cargo as the main target. As the seas stretch far and wide, the Coast Guard and the Navy may not be able to patrol all these areas.
There are also containers that are lost at sea. The World Shipping Council places the average annual container loss number at 546. Marine insurers can have coverage on container losses due to commotions and natural causes, but they are selective when it comes to theft.
Limitations of Carrier Coverage
Carrier companies and transporters have numerous statutes and waivers that limit their coverage in case of loss or damage. This is why separate marine insurance is a good fallback measure.
Importers and exporters have little control on the policy if they rely on the insurance of the other party. They are also subject to the laws of the country of origin/destination. If you have your own marine insurance, you have better control over the policy.
Required by Law
In some shippers’ contracts, marine insurance is required and if the shipper does not comply, they have limited claims when there is damage and the buyers may also think twice in dealing with them again.
Faster Release of Cargo Items
There is such a thing as the principle of general average, which states that for certain types of accidents, all parties will share the losses incurred. When applied, you are required to post a bond or cash deposit to facilitate the release of your cargo based on a general average. This is regardless of whether there was any damage incurred on your goods. When you have marine insurance, the insurer will take on the responsibility of this principle and have your cargo released.
The risks presented here and the corresponding losses are enough to justify the cost and importance of marine insurance. When it comes to marine transportation, any precautionary measure is always worth it. It ensures that your bottom line is protected in case a problem occurs.
