Cargo refers to the goods or commodities carried from one place to another in a vessel, aircraft or vehicle. Since the world of trade heavily depends on the successful and secure transportation of the cargo, cargo insurance is highly valued.
If you plan on buying a marine cargo policy, it is important to understand how it is different from cargo insurance. Let’s begin!
Cargo Insurance: Definition
Cargo insurance provides financial protection against unforeseen maritime perils and risks, such as pirate attacks, theft, loss of goods, damage and other accidents to the goods. This insurance falls in a category of transit insurance that specifically provides commodity protection.
If your cargo encounters loss-inducing circumstances, cargo insurance coverage will offer financial aid to compensate for the loss incurred. Cargo insurance coverage extends to different modes of transport, such as road, rail, sea or air. The baseline coverage of the best cargo insurance is listed below:
- Loss of cargo from fire, explosions, ship sinking or stranding.
- Expenses incurred due to overturning or collision.
- Complete or partial loss of cargo caused by natural calamities, such as earthquakes, cyclones, volcanic eruptions and more.
- Loss during loading, unloading and handling during the shipping process.
- Loss due to seawater entering the ship or the vessel.
- Expenses incurred for reducing loss of cargo.
- Damage to third-party cargo.
- Loss of cargo or vessel caused by intentional sacrifice to prevent further loss.
Cargo insurance costs are relatively low compared to the potential financial impact of loss or damage to goods.
Marine Insurance: Definition
Marine insurance is a financial instrument that offers protection against loss and damage endured and incurred by cargo and vessels. It provides coverage for commodities transported by road, sea, rail or air and secures aircraft, container ships, tankers, railways, or trucks.
Difference Between Marine and Cargo Insurance Policy
Marine insurance is then broadly categorised into hull and cargo insurance. Many times., people tend to use marine and cargo insurance interchangeably.
Cargo insurance protects the cargo or goods and commodities being transported. Conversely, marine insurance offers protection against risks that the cargo and the vessel might face during their voyage.
| Parameters | Marine Insurance | Cargo Insurance |
| Scope and Coverage | Includes cargo and hull both. | Includes cargo only. |
| Insured Parties | Shipowners, cargo owners and operators. | Importer, exporter, distributor or manufacturer. |
| Types of Policies | Hull insurance, cargo insurance and freight insurance. | Open cover policy and specific policy. |
| Risks Covered | Maritime perils, fire, piracy, war risks and more. | Theft, fire, accidental damage, natural disaster and malicious damage. |
| Premium Calculation | Ship, cargo, age of vessel, route, risk factors and more. | Cargo, distance of transport and mode of transport. |
● Scope and Coverage
Leading insurers like TATA AIG offer marine insurance covering a wide range of risks and losses associated with maritime transit activities. The scope of a marine insurance policy covers cargo and vessels.
Cargo insurance is focused on cargo security. The policy extends coverage for different modes of transport, such as sea, air, road and rail. It also covers loss and damage incurred by fire, theft, natural calamities, collision and more.
● Insured Parties
Marine insurance is typically purchased by shipowners, operators, exporters or importers. However, every party that has stakes in the transaction suffers from losses incurred and is an active participant in the trade is eligible to buy marine insurance.
Cargo insurance is purchased by cargo owners, exporters, distributors and manufacturers.
● Types of Policies
Marine insurance offers policies for various categories of maritime trade, such as hull insurance, cargo insurance and freight insurance.
Cargo insurance offers different types of policies, such as open cover and specific policies. A marine open policy covers all shipments within a certain period or up to a certain value, whereas a specific policy covers a single shipment.
● Risks Covered
Marine insurance covers maritime perils such as stranding, sinking, collision, storms, cyclones, pirate attacks and war zones, fire, theft, loss due to accidents, war risks and more.
Cargo insurance usually covers for theft, accidental damage, natural disasters, loss of cargo due to included circumstances, loss of income due to delay and more.
● Premium Calculation
Marine insurance premiums are calculated based on features such as the value and age of the vessel, the nature and value of the cargo, the route, the mode of transport, the trading limit, the type of insurance cover, ownership terms and more.
Cargo insurance premiums are calculated using features such as the value and nature of the cargo, mode of transport, specific risks, distance of transport, policy coverage and transit route.
Conclusion
Both marine and cargo insurance are vital in the world of transportation, logistics and trade. Cargo insurance provides essential cushioning for cargo owners, whereas marine insurance protects cargo and vessel owners.
While the two policies, marine and cargo insurance, are related, they serve distinct purposes. Remember, both policies work together to provide comprehensive coverage, addressing different aspects of maritime risk.
