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Business insurance protects companies financially from unforeseen events. It safeguards business assets and gives credibility in the market. Two such important types of insurance are marine insurance and product liability insurance. Marine insurance is vital for businesses involved in international trades, and product liability insurance caters to manufacturing businesses that distribute or sell products.
If you’re shipping goods across the seas or selling anything to consumers, then carrying the right insurance can save your business from massive financial risks. They cover the losses, allowing you to recover from setbacks quickly. This post will look at the major benefits and differences between the two types of insurance.
Table of Contents
What is Marine Insurance?
Sea transport is not without various risks. Marine insurance is a type of insurance that protects ships, cargo, and other maritime interests from such risks which might arise while in the ocean. Ships may encounter storms, collisions, piracy, theft, fire, or even sinking. Marine insurance covers such damages that may happen during transit.
But let not the name confuse you. Marine insurance covers goods transported by sea, land, air, or rail. It keeps your merchandise safe from the point of origin to the final destination and maintains a healthy global trade and commerce. International conventions and contractual agreements in maritime trade make marine insurance mandatory.
Types of Marine Insurance
Marine insurance applies to a particular geographical area or protected area. Based on that, the following are the types of Marine insurance:
Hull and Machinery: Hull is the most vital section of the ship as it protects the cargo from damage. This type of insurance protects against the damage caused to the ship’s body or any equipment that it carries for the proper functioning of the vessel. Ship owners take this insurance to cover the ship against any harm caused by collisions or damage caused by explosions, or earthquakes.
Marine Cargo: As the name suggests, this type of insurance covers cargo owners from any cargo damage that might happen during transit. Although its coverage is extensive, it comes with few limitations. For instance, if cargo loss happened due to defective packaging, then the owner’s claim is disapproved. It also has third-party liability, which means it protects the ship, port or railway track caused due to defective cargo.
Liability: If your company is found responsible for causing harm to someone or their property, liability insurance protects your business from financial loss. It covers you in case any damage, injury, or death happens to any third party travelling on the ship.
Freight: While on the sea, cargo is at constant risk from sinking, piracy, or bad weather. Freight insurance covers the shipping company from such uncontrollable events during transit. This ensures that the party expecting the payment doesn’t suffer a financial loss.
Product Liability Insurance
Faulty products may attract product lawsuits and other claims. Product liability insurance covers such expenses and transfers the risk of defects. Your business could be held responsible if a defective product causes injury or property damage. Your product can be anything ranging from clothing, food, to machines or medicines. And your injured third party could be your buyer, user or even a bystander.
A defective product may incur a variety of costs, like the price of getting rid of such faulty products or the replacement cost. In addition, there may be business disruption costs and fees owed to wholesalers or retailers. A decent product liability insurance should cover a range of costs that may be involved in the process.
What Does it Cover?
Product liability claims can arise from
- Design defect: something the products carry even before they were made
- Manufacturing defect: A Flaw that got into the product while on the assembly line.
- Warning or usage defect: This one is on the seller, if one fails to provide proper warnings or labels for safe use.
- Strict liability: When everything is okay, including proper usage, but still damage happens.
A good product liability policy will cover you during:
- Injury: Let’s say an employee got injured due to a mechanical failure caused by a conveyor belt system manufactured by your company, then your policy will cover legal expenses and any other claim settlements.
- Property Damage: A portable charger manufacturing company sells a charger that overheats and catches fire. It damages your customer’s desk. Your product liability policy covers all settlements.
- Illness: Imagine you own a bakery and a customer falls sick after consuming one of your contaminated cakes. Product liability protects you.
- Wrongful Death: Say your company manufactures scaffolding equipment, and one of your workers falls due to structural failure, resulting in a fatal accident. Your liability insurance will cover legal costs, burial costs and other death-related expenses.
Differences Between Marine Insurance & Product Liability Insurance
| Feature | Marine Insurance | Product Liability Insurance |
| Covers | Shipping goods & vessels | Defective products & consumer safety |
| Risks Covered | Damage, loss, or theft during transit | Lawsuits due to harm caused by a defective product |
| Beneficiaries | Exporters, importers, shipping companies | Manufacturers, retailers, distributors |
| Regulatory Requirements | Often required for international shipping | Often required for selling consumer products |
Conclusion
While deciding between a Marine insurance and a Product liability insurance, look into the nature of your operations and business type. If you’re shipping goods internationally or operating vessels, Marine insurance may be the right pick. On the other hand, if you’re a manufacturer, distributor, or retailer and your products might pose risks to consumers, then think about getting a tailored Product liability insurance. And in case you’re a food exporter shipping canned goods internationally, you may have to consider both.
