Navigating Different Types of Marine Insurance & Their Coverage

by | Last updated Nov 24, 2023 | Marine Insurance | 0 comments

There are many types of marine insurance addressed to specific risks and protect different interests within the shipping industry. 

If you’re familiar with the Suez Canal Blockade of Ever Given, it triggered many marine insurance policies that even today, maritime lawyers are busy discussing it.

Due to the complexity of this business and the varying risks involved, shipowners, charterers, cargo owners, and stakeholders use different insurance coverage as a form of protection. It gives them peace of mind from financial losses that may occur due to events such as accidents, theft, and weather damage.

What is Marine Insurance?

Marine insurance is an insurance that covers the risks associated with transporting goods by sea. It protects vessels, cargo, crew, and various other interests from perils associated with marine activities.

The primary objective of marine insurance is to mitigate potential losses and liabilities that may arise during sea voyages or while goods are in transit by sea.

This is actually a broad topic. I covered an extensive article about marine insurance in my previous post that you should check out.

Different Types of Marine Insurance

Marine insurance encompasses a broad spectrum of risks such as physical damage to vessels, cargo protection, liability coverage, freight and revenue protection, and many others.

Whether bulk carriers, tanker vessels, passenger ships, containers, or any type of vessel working at sea and/ or used to transport goods from one port to another, those protection gives you peace of mind

Here, we will be discussing three main types of marine insurance used in the shipping business. We will also tackle its sub-types that are more focused on covering specific risks.

1. Hull and Machinery Insurance

This type of marine insurance provides coverage for the ship itself and its mechanical parts. The term “hull” refers to the physical structure of the ship. This includes the hull, decks, and superstructure. 

Machinery” refers to the ship’s engines, boilers, and other mechanical equipment. 

The ship's hull or the side of the ship which is cut open in a shipyard.

Hull and machinery Insurance protects shipowners against financial losses that may arise from damage to the vessel or its machinery caused by perils of the sea, fire, piracy, and other risks.

Here are its subtypes:

  • Total Loss Only (TLO) Insurance – Provides coverage for the total loss of the insured vessel, but not for partial losses or damage.
  • Named Perils Insurance – Covers only specific risks or perils explicitly listed in the policy. If a loss occurs that is not caused by one of the named perils, the policy will not provide coverage
  • All Risks Insurance – Provides coverage for all risks of physical loss or damage to the insured vessel, except for those specifically excluded in the policy. 
  • Increased Value Insurance – Designed to provide coverage for the increased value of the vessel that results from repairs or improvements made after the vessel has been insured. For example, if a vessel is damaged in a collision and is repaired to a higher standard than its original condition, the value of the vessel may increase. 
  • Collision Liability Insurance – Provides coverage for the legal liability of a vessel owner or operator for damage caused to another vessel or property as a result of a collision.
  • Sue and Labor Insurance – Requires the insured to take reasonable steps to protect the goods against further loss or damage after a loss has occurred. The insurer will reimburse the insured for the cost of taking these steps, up to the amount of the insurance claim.

2. Cargo Insurance

Usually purchased by the owner or consignee of the goods, cargo insurance is a type of marine insurance that provides coverage for loss or damage to goods or merchandise while in transit by sea, air, or land.

Typically includes coverage for perils of the sea, theft, and other risks that may cause damage to the cargo.

Here are its subtypes:

  • Specific Cargo Coverage – Provides coverage for a specific shipment of goods from one point to another.
  • All-Risk Coverage – Provides coverage for loss or damage to goods or merchandise while in transit by sea, air, or land. All-Risk Coverage is also known as “all risks” or “open perils” coverage, and it is the broadest form of cargo insurance available.
  • Open Cargo Coverage – Provides coverage for multiple shipments of goods over a specified period of time.
A container crane in port lifting containers.
  • Contingency Insurance – Provides coverage for losses not covered under other types of insurance policies.
  • Warehouse-to-Warehouse Coverage – As the name suggests, Warehouse-to-Warehouse Coverage is a type of marine insurance that provides coverage for goods from the time they leave the warehouse of the shipper until they arrive at the warehouse of the consignee.
  • Voyage Coverage – Provides coverage for goods while they are in transit between two points. 
  • Time Coverage –  Provides coverage for goods for a specified period of time, rather than for a specific voyage or shipment.
  • Annual Policies – Provides coverage for multiple shipments or voyages over the course of a year. Businesses involved in the transportation of goods on a regular basis typically purchase this type.
  • Comprehensive Coverage – Insures broad protection for goods in transit, including coverage for loss or damage to the cargo, as well as liability for third-party claims.
  • Project Cargo Insurance –  Provides coverage for large, complex, and high-value shipments associated with construction or infrastructure projects. This policy provides comprehensive protection for all aspects of the project, including the transportation of materials, equipment, and other goods.
  • Delay in Start-Up (DSU) Insurance – Provides coverage for losses that occur as a result of delays in the start-up of a project.
  • Stock Throughput Insurance – Provides comprehensive protection for all aspects of the supply chain, including the transportation of goods, warehousing, and distribution.

3. Protection and Indemnity (P&I) Insurance

As a seafarer, this is probably the most well-known type of marine insurance. P&I insurance covers liability for third-party claims arising from marine-related accidents, such as pollution, collisions, and injuries to crew members.

Here are the sub-types that fall under P&I insurance:

  • Charterers Liability Insurance – Typically purchased by charterers, Charterers Liability Insurance provides coverage for liabilities that arise from the operation of a vessel under a charter agreement.
  • Freight Demurrage and Defense (FD&D) Insurance – Provides coverage for legal costs and expenses associated with disputes that arise from the operation of a vessel. Shipowners and operators typically purchase this type of policy since it provides protection against a wide range of risks, including disputes with charterers, suppliers, and crew.
A deck crew of an oil/chemical tanker going inside the cargo tank.
  • Crew Personal Accident Insurance – Usually purchased by shipowners, Crew Personal Accident Insurance provides coverage for accidents, personal injury, or death of crew members that arise from the operation of a vessel. As a seafarer, don’t “hide” any illness or injuries since shipowners insure us with this kind of insurance.
  • Pollution Liability Insurance – As the name itself suggests, Pollution Liability Insurance is a type of marine insurance policy that provides coverage for damages and liabilities that arise from pollution incidents caused by a vessel. 

4. Excess Liability Insurance

Excess Liability Insurance, as the name itself suggests, provides extra coverage beyond the limits of a regular insurance policy. It’s like having a backup plan in case something really bad happens and the regular insurance policy isn’t enough to cover all the costs. 

Businesses or people who want to make sure they have protection against really big losses that could be very expensive often purchase this type of insurance.

Excess liability insurance is also sometimes known as Umbrella Insurance.

5. War Risk Insurance

During the start of the Russia – Ukraine War where 15 merchant ships got bombed, the premiums for War Risk Insurance Policy skyrocket.

War Risk Insurance is a type of insurance that provides coverage for losses caused by war or other similar risks. It includes risks such as acts of terrorism, piracy, or civil unrest.

Since many standard insurance policies exclude this type of insurance, shipowners, charterers, and cargo owners must purchase it separately if needed.

Infographic of the different types of marine insurance.

6. Maritime Cyber Security Insurance

While the ship employs ISPS Security onboard, this is not enough for a new threat lurking on the internet. That’s why cyber security insurance is born.

Of all the types of marine insurance, Maritime Cyber Security Insurance is the newest. In fact, it blossomed due to the risk of cyber hackers disrupting the shipping sector. This insurance provides coverage for losses caused by cyber-attacks or other similar risks in the maritime industry.

The fuel that drove this insurance in shipping was when a cyber attack hits the shipping giant Maersk Group. It cost the company some $200 to $300 million dollars.

As we advance moving forward and apply modern technology, different risks may soon arise. Soon, we will have artificial intelligence and autonomous ships navigating from port to port. 

With that, new types of marine insurance will also enter the shipping sector. Understanding them is paramount for shipowners, operators, and seafarers alike.

Before purchasing one, be sure to consult licensed brokers with expertise in this field. They know how to tailor the best policy for your specific needs

May the winds be in your favor.



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