Marine Cargo Insurance
Goods in transit by sea, air, road or rail. The sale contract decides who insures them.
Marine cargo insurance covers goods while they are moving: by sea, air, road, rail or inland waterway, and in the storage that is part of the journey. Despite the name, most cargo policies written in India cover a truck from Ludhiana to Chennai, not a ship. The Insurance Act 1938 defines marine insurance business to include goods insured for any transit by land or water, or both, with or without warehouse risks.
The law of the contract is the Marine Insurance Act 1963, closely modelled on the UK Marine Insurance Act 1906. The cover itself comes from standard clauses: the Institute Cargo Clauses for imports and exports, and Inland Transit Clauses for movements within India.
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Which Clauses Apply to Which Transit
Export or import by sea
Clauses usually used
Institute Cargo Clauses (A), (B) or (C), plus war and strikes clauses
Example
Machinery shipped CIF from Hamburg to Nhava Sheva
Export or import by air
Clauses usually used
Institute Cargo Clauses (Air), plus air war and strikes clauses
Example
Pharmaceutical samples flown Hyderabad to Frankfurt
Inland by road or rail
Clauses usually used
Inland Transit Clauses (ITC-A for wider all-risks cover, ITC-B for named perils)
Example
Cotton bales trucked from Rajkot to Coimbatore
Coastal or inland waterway
Clauses usually used
Institute Cargo Clauses adapted for the voyage
Example
Steel coils on a coastal vessel from Vizag to Kolkata
| Transit | Clauses usually used | Example |
|---|---|---|
| Export or import by sea | Institute Cargo Clauses (A), (B) or (C), plus war and strikes clauses | Machinery shipped CIF from Hamburg to Nhava Sheva |
| Export or import by air | Institute Cargo Clauses (Air), plus air war and strikes clauses | Pharmaceutical samples flown Hyderabad to Frankfurt |
| Inland by road or rail | Inland Transit Clauses (ITC-A for wider all-risks cover, ITC-B for named perils) | Cotton bales trucked from Rajkot to Coimbatore |
| Coastal or inland waterway | Institute Cargo Clauses adapted for the voyage | Steel coils on a coastal vessel from Vizag to Kolkata |
Who Insures: The Sale Contract Decides
Cargo insurance follows the risk, and the risk passes from seller to buyer at a point fixed by the Incoterms rule in the sale contract. Under FOB the buyer carries the sea voyage and insures it; under CIF the seller must buy insurance for the buyer's benefit. Incoterms 2020 keeps Institute Cargo Clauses (C) as the CIF default and requires the higher (A) level under CIP. The full table is on the Incoterms page of this cluster.
Insurable interest (an IC-01 principle) must exist at the time of loss in marine insurance, not necessarily when the policy is taken. That is why an importer can insure goods before title passes, and why cargo policies and certificates are routinely assigned by endorsement to the buyer or the financing bank.
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Terms Every Cargo Underwriter Uses
- Warehouse-to-warehouse (transit) clause
- Cover starts when the goods first move in the warehouse at the named origin to be loaded for transit, continues through the ordinary course of transit, and ends at the earliest of delivery to the final warehouse at destination, delivery to any other place the insured uses for storage or distribution outside the ordinary transit, or the end of a fixed time limit after discharge from the overseas vessel at the final port.
- Valuation
- Cargo is normally insured on an agreed (valued) basis: invoice cost plus freight and insurance, plus a margin for anticipated profit agreed between the parties. Average then applies against that agreed value.
- Duty insurance
- Covers customs duty paid on imported goods that are later lost. It can be granted only on imports, alongside cargo insurance on the CIF value against the same risks, and not after the carrying vessel has arrived at the destination port.
- Increased value insurance
- Covers the rise in the goods' value at destination above the CIF and duty value, for example because market prices rose during the voyage.
- Certificate of insurance
- A document issued under an open policy or open cover for each shipment. In export trade the certificate, endorsed over to the buyer or bank, does the job of the policy.
How IC-11 Tests This
Expect "under which delivery term does the seller insure" (CIF), the end of cover under the transit clause, when insurable interest must exist in marine insurance (at the time of loss), and duty or increased value insurance. The trap is assuming marine means sea: inland road and rail transits are marine cargo business too.
FAQs
What is marine cargo insurance?expand_more
Insurance of goods against loss or damage while in transit by sea, air, road, rail or inland waterway, including storage that forms part of the transit. It is written on standard clauses such as the Institute Cargo Clauses and Inland Transit Clauses.
What is the warehouse to warehouse clause in marine insurance?expand_more
The transit clause that makes cargo cover run from the warehouse at the origin, through the journey, to delivery at the final warehouse at destination, subject to a time limit after discharge at the final port.
Who is responsible for marine insurance under CIF?expand_more
The seller. CIF obliges the seller to insure the goods for the buyer's benefit, at minimum on Institute Cargo Clauses (C) under Incoterms 2020 unless the parties agree more.
Is inland transit covered under marine insurance?expand_more
Yes. The Insurance Act definition of marine insurance business includes goods insured for any transit by land or water, and inland movements are covered under Inland Transit Clauses.
Next steps
- Cargo Clausesarrow_forward
- Incotermsarrow_forward
- Open Policy vs Coverarrow_forward
- Insurable interest (IC-01)arrow_forward
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