Marine vs. Cargo Insurance: Key Differences Explained

Most people think that marine insurance only applies when a vessel is carrying cargo. But marine insurance also covers the ship itself even when it is not transporting goods, when it’s docked, under maintenance, or sailing empty. Cargo insurance, however, becomes active only when goods are in transit.

So, what is the difference between marine and cargo insurance and which one should you choose? Find out all about marine and cargo insurance and explore marine insurance policy from Bajaj General Insurance to protect your goods and vessel against perils of the sea.

What is Marine Insurance?

Marine insurance is that type of insurance that provides protection against losses or damages to ships and cargo, and when goods are transferred or held between the points of origin and destination. Marine insurance includes:

1. Hull and Machinery (H&M) Insurance: This covers the ship’s physical body (the hull) and its machinery or equipment. If the ship is damaged due to accidents, collisions, fires, etc. then the loss is covered.
2. Cargo Insurance: When goods are transported by sea, road, rail, or air, it protects against loss during transit.
3. Protection and Indemnity (P&I) Insurance: Suppose a ship causes damage to other vessels or causes pollution due to oil spills, then it covers third-party liabilities.
4. Freight Insurance: Sometimes the cargo may be lost or delayed due to some unforeseen event. At such times, freight insurance protects the shipowner or charterer against loss of freight income.

Why Marine Insurance is Important?

1. Marine insurance protects the vessel and the machinery; it also protects goods and merchandise from insured perils like collision, fire, or sinking.
2. When events like environmental pollution due to oil spills, loss of life or crew members, or collisions with other ships arise, it gives rise to third-party liabilities which are also covered.
3. Marine insurance helps vessel owners and operators avoid heavy financial losses and they can continue their business operations.
4. For exporters and importers, marine insurance supports international trade. This type of insurance meets bank requirements by safeguarding shipments during transit.
5. Vessel owners and transporters can focus on their business operations without worrying about losses or risks.

What Is Cargo Insurance?

Cargo insurance is a specialised type of marine insurance that focuses only on protecting the goods or cargo in transit. The insurer promises to protect the goods till they reach the destination, whereas marine insurance covers the entire vessel. The following is covered under cargo insurance:

1. Loss or Damage to Goods: When goods are damaged due to accidents, collisions, fire, etc., the insurance company pays you for the loss.
2. Theft or Pilferage: Goods can be lost due to theft, this loss is also covered.
3. Damage During Loading and Unloading: Goods can get damaged while being moved and cargo insurance covers such mishaps.
4. Natural Disasters: Natural disasters like the occurrence of storms can affect the shipment and cargo insurance covers the loss.
5. Jettison: If part of the cargo is intentionally thrown overboard (jettisoned) to save the ship or other cargo, the insurance company will compensate the owner for their share of loss.

Why Cargo Insurance Is Important?

When goods are transported by sea, there is a risk that they may be lost due to theft or may be damaged due to accidents. Cargo insurance protects businesses as they compensate if the goods are lost during transit.

When to Choose Which Policy?

Both marine and its subset, cargo insurance play an important role in international and domestic trade. But which policy to go for will depend on a number of factors.

Businesses that own and operate vessels and have responsibilities beyond just cargo should go for marine insurance. It provides full-spectrum coverage for ships, machinery, crew liabilities, and cargo. Whereas if you only transport goods domestically or internationally and do not own any vessel, you can choose cargo insurance.

You should choose marine insurance if:

1. You own a vessel or operate it: If you own a ship or a vessel, purchase marine insurance to cover the vessel’s hull, machinery, and equipment from perils like collisions, fire, and natural calamities.
2. You run a port or shipyard: Those who operate ports face risks such as damage to cranes and other equipment. Marine insurance provides protection to such infrastructure.
3. You want to protect your crew and want liability insurance: Marine insurance includes liability cover for injuries to crew members.
4. You want protection against third-party liabilities: You would be protected against damage to other vessels and pollution caused by your ship.

You should choose cargo insurance if:

1. You are an exporter or importer: If you send or receive goods across countries, you will need cargo insurance to protect goods against damage or theft.
2. You are a manufacturer that ships goods: If you ship goods to customers or retailers, cargo insurance will protect your goods till they reach the final destination.
3. You use freight forwarding services: You are responsible for the delivery of your own goods even though third-party logistics providers handle them. At such times, purchase cargo insurance.
4. You want to protect high-value goods: If you deal in fragile or expensive goods, purchase marine insurance to protect your goods from mishandling and natural disasters.

Conclusion

If you are an MSME or an organisation that transports goods or operates ships, marine and cargo insurance are essential insurance policies that you must consider for complete protection and to stay financially stable in case of losses.

For more details on the marine insurance policy and to keep your shipping business secured, contact Bajaj General Insurance today.

FAQs

1. What is the main difference between marine and cargo insurance?

Marine insurance is comprehensive and covers vessel, cargo, and third-party liability. Cargo insurance only covers loss or damage to goods in transit.

2. What does inland marine vs cargo insurance mean?

Inland marine refers to goods transported over land (rail, road) part of marine coverage. Cargo insurance includes inland marine as well as sea and air transit.

3. Are war risks covered under cargo insurance?

Only if you opt for a specific rider for war or strike risks; otherwise, general cargo plans exclude these by default.

4. Who needs hull insurance?

Vessel owners and operators—especially those with commercial shipping entities—should opt for hull & machinery coverage.

5. What documentation is required to file a cargo insurance claim?

Typically includes bill of lading, commercial invoice, packing list, surveyor’s report, and proof of damage or loss.

6. Can I bundle marine and cargo insurance policies?

Yes. Insurers offer comprehensive marine solutions that can include cargo and hull lines under one package depending on your business model.

*Standard T&C apply

**Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

***Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.