Freight Insurance in Marine Insurance

Freight is to be payable for the carriage of cargoes or if the vessel, is chartered, the money to be paid for the use of the vessel.

The carriage is unable to earn freight if the goods or properties (cargoes) are not safely transported.

Pre-paid freight payable in advance is at the risks of the cargo who includes it in the value of the goods insured under a cargo policy.

But freight payable only on delivery of the goods at the destination is at the risk of the shipowner who has insurable interest in it and therefore can insure it.

The disbursement warranty of the ITC (Hulls) allows the ship owner to effect in conjugation with 12 months insurance on the ship’s hulls and machinery etc.

Time insurance on freight and/or charters freight and/or anticipated freight.

When the ship is lost, it also results in loss of her profit earning capacity and the termination of freight contracts already entered into. A certain amount of freight is insured by a ship owner for a period of 12 months under the Institute Time Clauses (freight).

Additional policies are insured on a voyage basis. The freight at risk on any voyage exceeds the amount insured for time. The Institute Voyage Clauses (freight) are then used.

Time charter hire is payable to the ship owner for the use of his ship for carriage of goods for a specific period of time.

If any events occur, such as breakdown of machinery damage to the vessel etc. which prevents the operation of the vessel for more than 24 consecutive hours, of the payment hire shall cease until the ship becomes operational.

This freight is at the risk of the shipowner.

Freight Standard Clauses

The standard clauses in use are Institute Time Clauses-Freight (1.10.83) and Institute Voyage Clause Freight (1.10.83).

Freight is insurable on a time basis.

Shipowners usually insure a certain amount on freight for a power of 12 months. Additional policies on voyage basis are issued if the freight at risk on any one voyage exceeds the amount insured for time.

A loss of freight to the carrier who may be a shipowner or a character – can only arise when the freight is payable at destination and the carrier runs the risks of not receiving it be reason of loss of ship and/or loss or damage to cargo.

No such loss can arise to the shipowner where freight in advanced of prepaid is not repayable if the ship and/or cargo is lost because in such cases the freight is usually merged with the value of the cargo and any claim would be made under the policy covering cargo.

The freight may be prepaid freight; freight payable on ship or cargo lost or not lost, freight payable on delivery, lump sum freight , time charter hire.

Prepaid freight is not refundable in case of non-delivery of the goods and hence it is not a risk of shipowner.