If your business involves the shipment of goods locally or abroad, whether inland or across the ocean, you need to realize that the moment those goods leave the door, they change hands many, many times, and there’s no knowing what may happen.
To protect your goods and your business, you need to have marine insurance. But how do you choose the right one? Here are a few dos and don’ts:
1. Don’t confuse marine insurance with boat insurance. Boat insurance protects water vessels and their passengers. It’s like car insurance, except the car floats on water.
Marine insurance is an altogether different banana. Despite its name, it is not limited to protecting waterborne cargo. It protects cargo transported on dry land as well, on top of protecting the vessel that carries the cargo.
This is why there is such a thing as “dry” marine, for land-transported cargo, as well as “wet” marine, for cargo shipped via actual ships.
2. Don’t lie on your application form. Don’t conceal relevant information either. There is a fine line between the two: lying on your form means you deliberately put in wrong information. Concealing information means that it was not mandatory for you to divulge the information but you know that divulging it would have affected your policy in an adverse way.
Either way, should it be discovered that you lied or concealed relevant information, it would most likely void your policy, defeating the purpose for which you got the insurance in the first place.
3. Don’t break your warranty. In insurance law, a warranty is fundamental to the performance of the contract. If it is breached, the non-breaching party may terminate the contract in addition to claiming damages.
One common implied warranty in marine insurance is the seaworthiness (or road worthiness) of the vessel.
Be aware if a warranty is breached, it will not help the insured to remedy the warranty; the policy will be rendered null and void regardless.
So before you take out a policy, make sure you are aware of all the warranties included, and ensure that you breach none of them. This brings us to our first do…
1. Do read the fine print. While the fine print can be tedious to read, we all know – some through painful experience -ignoring it is like parking under a construction site: It’s just a matter of time before something hard and heavy hits you on the head, and you may not live to regret it.
The fact is, unless you’re a first grader just learning to read, it won’t take you five minutes to read the details of the contract you’re entering into. (Never mind if it feels like an hour – it’s really not.)
The fine print will tell you the details of what you’re paying for, what rights you may have that you may not have been told about, what conditions are not covered by your policy, and what actions will render your policy null and void. For instance, inadequately packed cargo is usually not covered. Neither are dangerous items such as combustibles, firearms, and chemicals. Others may not cover food, timber, and animals. There may also be navigational limits that, if exceeded, will void your policy.
2. Do compare policy offers. And don’t rely on price alone.
Perhaps the reason why that policy is so cheap is because it only covers actual value, which is the value of your insured item at the time it was lost – and this includes depreciation, so you’ll probably end up getting much less than what you expected.
On the other hand, that other policy may cost more, but it insures your item for the amount you had agreed on (agreed value), on paper, so when the item is lost, you get compensated for the exact amount you’re expecting, which will allow you to immediately replace the lost item with a brand new one.
What about the causes of loss covered by the policy? Non-filed policies only cover for specific types of loss and may not cover acts of god. Then again, maybe they do.
Read the fine print to know exactly what you’re paying for. Just because it’s the cheapest marine insurance policy doesn’t mean it’s the best. And if you’re in business, you should know you should only invest in the best, or suffer loss later.