Last Updated: June 10, 2022

Is Ocean Marine Insurance The Best Protection For Your Business?

What is Ocean Marine Insurance? 

Ocean marine insurance protects property while it is transported across domestic and international waters. Additionally, it also covers property in each stage of its transport, such as land or air transit, as long as it is associated with a marine shipment.

According to the UNCTAD, international seaborne trade volume reached an all-time high of 11 billion tons in 2019. With such high volumes of goods comes an equally high number of risky events. Here are some events that cause loss and damage to cargo ships:

  • Collisions with objects and other ships
  • Sinking
  • Fire
  • Pirate attacks
  • Capsizing
  • Barratry
  • Jettisoning
  • Unpredictable weather

These events can cause millions of dollars’ worth of damage to shipping businesses and affect their future operations. For example, the NCDC-NOAA stated that 22 weather and climate disasters in the US resulted in losses exceeding $1 billion in 2020.

In this blog

What Does It Cover? 

Ocean marine insurance covers businesses from the risks associated with the transportation of goods across the ocean. Overall, the policy provides coverages for the shipping vessel, also known as the hull; the cargo being transported; the revenue made by the shipping company; and the liabilities associated with shipping.

Hull and machinery coverage

A ship, its machinery, and operating equipment are all susceptible to physical damage. Hence, an ocean marine insurance provides coverage for damage from accidents, fire, collisions, explosions or harsh weather. Furthermore, its coverage includes additional provisions for collision liability coverage, which covers collisions at sea with other ships or fixed objects.

Ocean cargo insurance

Ocean Marine insurance provides financial aid for losses arising from physical damage to onboard cargo in the event that there is risk at sea. The damage can result from disasters such as bad weather, tidal waves, collisions, pirate attacks, cargo abandonment, or customs rejection. A few policies also cover the losses from theft and looting if the cargo is in transit or at an offshore location.


Ocean freight insurance

Ocean freight insurance covers the liabilities of cargo vessel owners if the cargo is damaged or lost. In case of damage to the cargo, the shipper needs to provide a replacement cargo, which results in the second payment of shipping costs. For such cases, ocean freight insurance will cover the damaged goods’ costs and the shipping charge.

Protection and indemnity insurance

Ocean marine insurance policy provides coverage to ship owners for the legal liabilities associated with injuries to passengers, crew, as well as other personnel. As a result, the liability can arise due to the following reasons:

  • Vessel’s operation which causes an injury, illness or death.
  • Medical expenses for an injury, illness or loss of life.
  • Expenses related to contactable diseases.

Marine general liability insurance

Marine general liability insurance provides coverage against liabilities for marine or vessel operations. These liabilities can result from the following reasons:

  • Collisions leading to physical damage to other vessels or property.
  • Non-collision incidents that cause damage to other vessels or property.
  • Removal and cleaning of wrecks.
  • Oil spills or civil pollution liabilities.
  • Damage to onboard cargo.

Ocean Marine Insurance Exclusions

The following are the most common exclusions in commercial ocean marine policies:

  • Passenger ships: Ocean marine insurance does not include passenger ships, such as ferries, in its coverage.
  • Employee strikes and civil riots: The policy does not include liabilities arising from employee strikes or civil riots.
  • War: The policy does not cover damages or liabilities resulting from war.
  • Cost of parts repair: The policy does not cover the cost for the repair of ship parts.
  • Losses from shipping delays: The insurance policy does not provide coverage from losses resulting from a shipping delay.
  • Willful misconduct: The policy does not provide coverage for losses resulting from negligence, recklessness, disregard and willful misconduct.
  • Natural wear and tear: The insurance policy is not liable for damages resulting from natural wear and tear such as rust, hidden defects, prolonged use, and temperature extremes.

Types of Insurance That Include Ocean Marine Insurance Policy 

Ocean marine insurance may include the following policies:


Factors That Determine the Cost of Ocean Marine Insurance 

The cost of any insurance policy depends on a few factors. In the same fashion, the cost of ocean marine insurance is based on certain key factors:

Loss History

Factors such as claims history, nature of loss, and details of past claims need to be considered before pricing the premium of an ocean marine insurance policy. The loss history and exposure to loss factors are important elements to consider when determining the policy rate. If clients have made multiple claims in the past, then their premiums will be higher.


According to Investopedia, incoterms are a set of conditions established by the International Chamber of Commerce to promote global trade. Likewise, it is also a globally accepted set of foreign trade rules that defines the buyer and seller’s obligations. As a result, these terms help identify the liabilities of both parties. Thus, the policy rate is influenced by which liabilities Incoterms have attributed to each party.

Route Risk

There are various routes a ship can take while transporting goods. Some routes can be riskier than others depending on the weather conditions and the likelihood of pirate attacks. Ships that take dangerous routes are charged higher than those that do not.

Destination Risk

The cost of an ocean marine policy increases if the destination is difficult to reach. For example, shipments in hard-to-reach geographical regions or politically unstable locations have expensive premiums.

Vessel’s Type and Construction

The construction of a shipping vessel differs in its construction material, adaptability, and structural strength. As a result, these aspects affect their ability to carry different cargo. Additionally, the vessel’s age, classification, and shipping company also affect the policy’s cost.

Nature of the Goods

Industrial materials such as cement have a higher chance of getting damaged in the shipping process. Therefore, transporting goods that cannot be salvaged tend to have a higher premium rate.

Policy Conditions

The premium rates are based on the policy coverages as per the client’s needs. Some policies cover total loss, while some only cover partial loss. Also, a few insurers add or limit clauses in the policy, which can affect the cost.

Looking for a policy for your business? Find an agent near you today.

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Frequently Asked Questions (FAQs) 

What Does Cargo Mean in Ocean Marine Insurance?

Cargo refers to the products that are inside the shipping vessel. It can include any goods such as construction materials, textiles, machinery, or automobiles. Cargo is a general term used to describe all items that are being transported.

Why Should I Purchase An Ocean Marine Insurance Policy?

Ocean marine insurance is essential for many businesses, such as exporting or importing goods, marine contracting services, or maritime transportation services. Therefore, the policy assists you in overcoming unforeseen financial losses arising from damage or loss of goods at sea.

How is Ocean Marine Insurance Different From Inland Marine Insurance?

Ocean marine insurance provides coverage for property transported on water bodies. It provides coverage to the vessel, cargo, and the liabilities related to shipping in domestic and international waters. Whereas inland marine insurance only provides coverage for property that is transported on land.

Infographics Ocean Marine Insurance

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