What is a Voyage Policy?
According to the Indian Marine Insurance Act 1963, a voyage policy is a type of marine insurance policy that provides coverage for losses due to unforeseen risks to cargo during a specific voyage. It is also known as marine cargo insurance.
- According to the Indian Marine Insurance Act 1963, voyage policy is a type of marine insurance policy that provides coverage for losses due to unforeseen risks to cargo during a specific voyage.
- The policy contract contains complete details of the risk, along with information about the bill of lading, name of the vessel, etc.
- A voyage policy is different from a time policy in that it considers other aspects of marine travel.
How Voyage Policies Work
Any insurance policy is designed to indemnify the insured against risks of damage to property, the environment, or human life in the event of a natural calamity, accident, theft, etc. A voyage involves the following high-stake risks:
1. Damage to valuable cargo or the expensive ship
2. Damage to the environment due to leakage of oil
3. Loss of life or harm to the captain and crew
To safeguard against the risk of damage to cargo, a voyage policy is taken before the inception of a voyage. It is valid for that particular voyage and ends when the cargo arrives at its destination. It doesn’t cover the port stay and loading/ unloading of cargo.
The policy contract contains complete details of the risk, along with information about the bill of lading, name of the vessel, etc. As a voyage policy protects only the cargo in transit and not the ship, it is mostly taken by cargo owners involved in international trade.
What Risks are Covered?
A voyage policy covers only unforeseeable and unpreventable risks. At the beginning of the voyage, the ship must be seaworthy for that transit for the policy to uphold.
It is considered seaworthy when it is fit to encounter the ordinary perils of the seas in the transit. In addition, the ship’s crew must be reasonably competent.
The policy covers the cargo during the whole voyage by sea, even if there are delays en route. It is feasible to extend it to include extra cover against perils like a strike, riot, civil commotion, etc.
Voyage Policy vs. Time Policy
There are two types of marine policies:
1. Voyage Policy
A time policy is valid for a specified period, generally a year. Its contract lays down the precise minute when the cover comes into effect and when it terminates. While a voyage policy insures the cargo in transit from one place to another, a time policy insures it for a definite period.
A voyage policy suits those businessmen or traders who rarely require marine insurance policies, or who export a relatively small amount of cargo by sea.
2. Time Policy
On the other hand, major export houses with a high frequency of voyages prefer a time policy that protects all the cargo that they ship for a specified period.
Suppose a trader insured their cargo through a time policy. Due to personal reasons, the captain of the ship arrives two hours late. As a result, the time covered by the policy runs out, and the cover ceases even though the cargo is still on the high seas.
For such a reason, the cargo is mostly insured on a voyage basis. Coupling the benefits from each end, marine insurance today is mostly an amalgamation of both time and voyage insurance policies.
Consider XY Ltd., a computer hardware manufacturer in India that recently ventured into the export of monitors and motherboards. Last month, it received a huge order from an MNC in Singapore. To safeguard the equipment against the risks in transit, XY Ltd. purchased a voyage policy.
Halfway through the voyage, the vessel found itself in the middle of a strong typhoon. Though the equipment was carefully packaged, part of it got damaged. When the vessel reached Singapore’s port, the buyer refused to accept 60% of the consignment.
XY Ltd. claimed indemnification from the insurance company. As the sea storm was an insured peril in the policy contract, the insurance company covered the loss of revenue. Here, the loss was incurred during that particular voyage before the ship was able to reach its destination. Hence, XY Ltd.’s claim was valid.
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