Types Of Marine Insurance Part 2 – Freight and Liability Insurance

Marine Insurance


The origins of the marine insurance industry are there in the Greek and Roman books. The concept of maritime loan was the foundation of marine industry there. Around the 14th century in Genoa insurance contracts were entered into. Later on it spread across Northern Europe.

The LLOYDS of England were the ones who initiated the Marine insurance business. Their location for the business was LLOYD’S COFFEE HOUSE. The reason for initiating such a business was the increasing rate of industrialization.

This led to need for some assurance if the ships did not reach the shore and got damaged or sunk during their voyage.

The LLOYDS and Institute of London u/w came together in the end of the 18th century and created clauses for marine insurance which are applicable even today.

Marine Insurance

Marine insurance ensures the insurer of coverage of his losses in case the ship, cargo, freight and liability are damaged or sunk or the contract is not obeyed.

The major types of marine insurance are :

  • Cargo
  • Freight
  • Liability
  • Hull

Cargo Insurance

It covers the goods insurance that is carried on the ship. This insurance caters to protect the ship owners against the loss occurring from goods and services on the voyage.

Freight Insurance

It covers the losses occurring from the money lost while transporting the cargo. Hence it is the profit lost due to some damage to cargo.

Liability insurance

It covers the losses occurring from the damage of ship or loss of ship due to collision or crash. Hence the loss from the damage to the ship is provided.

Hull Insurance

It covers the front and back of the ship along with some parts of furniture attached to the ship. All the technology that is included in the ship along with the machinery and propellers is covered in this type of insurance.

Marine insurance covers certain perils which are :-

  • Fire and protection
  • Perils of the sea
  • Jettison (throwing of the cargo if needed)
  • Breakage
  • Accident
  • Theft
  • Barratry (fraud or gross negligence of a ship’s master or a crew at the expense of its owners)
  • Non-delivery
  • Pilferage (stealing things of little value)


  • Acceptance
  • Proposal
  • Consideration
  • Issue of policy
  • Utmost good faith
  • Indemnity and subrogation
  • Proximate cause
  • Return of premium
  • Insurable interest
  • Warranties (the person insured should take care that minimum loss occurs in every situation and that no loss is done voluntarily or else he/she might not get the claim)

Freight Insurance

Freight insurance is a very unique type of insurance cover which acts and protects the ship owners against loss of earnings. Many times it is possible that the ship cannot get the necessary number of passengers for the ship is unable to get floated or the ship is chartered or the Cargo damage can cause loss in owner’s income. Hence all these aspects are related to loss occurrence for the ship owner. In freight insurance such a situation is avoided and the shipowner gets protection against all such damages and potential losses in income and profits during any such situation.

The major types of freight insurance include :

  • Chartering
  • Cargo carriage


The concept of chartering is related to letting out your own ship to a third party for completion of the ship owner’s work only. This means that the ship is let out and no income is generating. While the ship is on voyage, it will generate a pile of wages of crew members and maintenance of the ship. So to avoid any such situation and lose the insurance type taken under freight insurance is known as chartering insurance. Hence chartering is a very well known concept for ship owners having major deals and business with third party firms.

Cargo Carriage

This is the most essential type of loss under the head of freight insurance. The reason is Cargo is very costly sometimes. The cost of small cargo may be into millions or billions of dollars. Hence having insurance for cargo damage or loss is necessary. For this the insurance opted is freight insurance only.

This is the most used and opted type of insurance under freight insurance. The reason is every ship owner takes insurance against the goods he is  taking on board. The reason is Sea and weather are not stable and the journey involves a high amount of risk. Hence any damage pertaining to the cargo while voyage can be provided with this insurance.

Important About Freight Insurance

During the process a separate time period is provided on behalf of the insurance company. This period is provided so that the companies can take a note of the incident and fix the damages or bring solutions. This period is the waiting period. After the waiting period is over the claim is ready for investigation. Post investigation the ship owner receives some amount of money on behalf of the insurance company for reimbursement. This reimbursement is there to stay for some period of time and the company kicks starts to sort the problems. Proportion or a full insurance plan will be given in such cases depending on the cause and investigation.

The exceptions to this insurance involve : War, Strikes and Malicious activities carried on the ship or by the owner of the ship.

Liability Insurance

The liabilities avail on the shipowners come in different formats. They could be related to the law of a particular country (the ship is going for voyage), voluntary or mandatory terms tagged by oral or written agreement (contract).

Through liability insurance the shipowners keeps a track of the losses occurring from serious and uncertain activities, this type of insurance covers few types of activities and situations with it. They are :

  • Employee or visitor’s death or demise or loss
  • Product fault
  • Improper advice from the experts
  • Ship accident

Out of all these the most used and preferred ones are Personal loss or injuries and ship collision or accident.

Personal Loss

The major people having connection to this type of insurance are the crew members of the ship and the dock. The passengers also come under this but they are not broadly the part of it. The people working on the ship suffer from many injuries and this covers that thing in particular. Any person on dock faces any medical problems due to their work. Everyone is provided with proper medical care. If the person loses his or her life then also such insurance is applicable for them.

Ship Accident

This heading is for the situations arising from the ship collision or accident. The Hull Insurance covers the major part for any such loss. However in liability insurance the loss that cannot be refunded are settled here. Hence it is important to have liability insurance as well. The reason is the ship is a giant vessel which carries cargo for voyage having such an insurance ensures major losses from Cargo and also ensures people’s safety and backing up in the situation of accident or collision.

Important Things about Liability insurance

The insurance companies generally exclude many claims in such a process. Major claims are related to pollution costs. This is result of spoilage from the ship. Next up is waste dispatch cost. At the time time of an accident lot of waste generates in the sea. This needs clearance as per the rules and regulations. These things have great costs associated with it. The last one is personal loss. The reason for not covering loss is very simple. That claims are provided under life insurance policy. Hence such cases are normally not settled.

The major exclusions under the list of liability insurance are : Hull insurance or things included under physical damages insurance claim, Wars, Nuclear wars or Loss of passengers and employees.

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