What Are the Principles That Govern Marine Insurance Policies?


Transportation by any mode has inherent risk, be it road, air or water. Be it for goods or for passengers, ensuring a safeguard in place is crucial. While personal accident policies are specifically designed to insure against injuries, commercial policies are designed to prevent losses financial losses that might arise for the goods.

One such type of commercial insurance is marine insurance. This policy has existed since overseas trade started to evolve and has gained its importance ever since. The process of transporting goods via waterways has its share of risks like damages at the dock, pirate attacks, accidents, etc which might result into losses. These events can result in damaged shipments, and sometimes even loss of the shipment entirely. To protect business against these financial hiccups, using a marine insurance policy can come handy.

This article elucidates on five such principles that govern marine insurance plans –

  1. Principle of Utmost Good Faith

Uberrimae fidei in Latin translates to utmost good faith is common principle that governs the insurance sector. Here, it the context of marine insurance, it requires the policyholder to state all information true and correct to the best of their knowledge. Further, it expects no material information is withheld that might have an impact of the claim amount. Any material information if withheld by the insured person can be a sufficient cause for rejection of their application.

  1. Principle of insurable interest

This principle states that it is important for the policyholder to have some form of insurance interest for which insurance is sought. To simplify it, buying insurance should help the buyer avoid a loss which would be faced otherwise. In case of a marine insurance policy, if the policyholder does not have any insurable interest, it is expected to have in the future. For a claim to be sanctioned, it is crucial to have insurable interest.

  1. Principle of Indemnity

The purpose of insurance is not to make profits but only for indemnifying their loss. The principle of indemnity states that a policyholder shall be compensated only to extent of the loss and not thereafter. The contract of insurance is not entered to gain profits but to cover for losses.

  1. Principle of Cause Proxima

In events where a series of events end up causing damage to the consignment, according to principle of cause proxima, the closest cause that aids in analysing such loss shall be considered. No event that occurred is remote is analysed but instead the nearest cause that might have resulted in a loss is analysed for the liability.

  1. Principle of Loss Minimisation

No liability insurance cover indemnifies the holder for irresponsible acts when covered by one. So, for a claim to be passed by the insurance company, there should be complete evidence of all necessary precautions exercised by the policyholder. The principle of loss minimisation states the above.

These are some ways how the principles of marine insurance help to avoid a monetary loss due various unfortunate events to the consignment or the ship. So make sure to add the necessary marine insurance coverage to avoid a financial loss the next time you are importing or exporting any goods. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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