Fire and Marine Cargo Insurance in India: Goods in Transit, Large Risks and Lost Profit

The Short Answer

Marine cargo insurance covers goods while they are moving: from your supplier’s godown to yours, from your factory to a customer, or across a border. Despite the name, it covers road and rail as well as sea and air. It is bought either one consignment at a time or, for regular shippers, as an open policy that covers every dispatch over a year.

Fire insurance for larger businesses, those with more than ₹50 crore of assets at one location, comes from insurers’ own fire and special perils policies rather than the standard Bharat products. And for any size of business, business interruption cover (often called fire loss of profit) is the piece that pays the bills while a damaged unit is out of action. Neither the standard fire policy nor the cargo policy does that.

A truck that overturns does not just damage the goods. It breaks a delivery, a payment cycle and sometimes a customer. Insure the goods; plan for the rest.

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Marine Cargo

Who needs to insure goods in transit

The first question is not what to buy but who carries the risk during each leg of the journey. That is decided by the sale contract. For international trade, the Incoterm on the contract fixes the point at which risk passes from seller to buyer. For domestic trade, the terms of sale and delivery do the same. Under the Marine Insurance Act, 1963, you can only recover if you have an insurable interest in the goods at the time of the loss, so insure the legs where the risk is yours.

Do not rely on the transporter. A carrier’s liability for damage is usually limited, often disputed, and slow to recover. Cargo insurance pays you first, and the insurer then pursues the carrier.

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The Cover

How much cover: A, B and C clauses

Level	Road and rail (inland transit clauses)	Sea and inland waterways (Institute Cargo Clauses)
A: all risks	Loss or damage from any external cause, except exclusions	Loss or damage from any external cause, except exclusions
B: basic	Named perils such as fire, overturning, collision and derailment	Named perils, including major casualties and some water and handling risks
C: restricted	Fire and lightning	Major casualties only, such as fire, sinking, stranding and collision

Air shipments are covered on an all-risks basis. Goods sent by courier or registered post are usually covered only alongside a road, rail, sea or air transit, not on their own. For most traders, all risks (A) is the right default: the price difference is usually small, and B and C leave theft, pilferage and many forms of handling damage uninsured.

What cargo insurance does not cover

• Poor packing: loss caused by packing that is unsuitable for the journey.
• Delay: loss caused by delay, even if an insured event caused the delay.
• Inherent vice: deterioration from the nature of the goods themselves, such as ripening or natural leakage.
• Ordinary losses: normal loss in weight or volume, and ordinary wear and tear.
• Strikes and war: excluded from the basic cover; available as separate extensions where needed.

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Buying It

Specific policy, open policy or open cover

Type	How it works	Suits
Specific (single transit) policy	Covers one named consignment for one journey	Occasional shipments
Open policy	Covers all dispatches over a year up to an agreed amount; premium is adjusted at the end against actual dispatches	Regular domestic shippers and traders
Open cover	A standing agreement under which each shipment is declared and covered on agreed terms	Regular importers and exporters

Sum insured. Insure cargo at invoice value plus freight and other costs of getting it there, and add a margin, commonly about 10%, for incidental costs. Insuring at bare invoice value leaves the freight and margin unprotected.

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When Goods Arrive Damaged

The marine claim, step by step

• Inspect on delivery and write the damage or shortage on the delivery receipt or lorry receipt. Never sign a clean receipt for damaged goods.
• Notify the insurer immediately and ask for a survey. Prompt notice is a policy condition.
• Lodge a written claim with the carrier within the time allowed, to protect the right of recovery.
• Keep the damaged goods and packing for the surveyor, and take photographs.
• Submit the documents: policy or certificate, invoice, packing list, transport document (lorry receipt, railway receipt, bill of lading or airway bill), survey report, the claim on the carrier and photographs.

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Fire For Larger Units

Fire insurance above ₹50 crore

The standard Bharat Sookshma and Bharat Laghu policies stop at ₹50 crore of assets at one location; we explain them in our shop insurance guide. Above that, businesses buy an insurer’s own standard fire and special perils policy, or for large industrial sites an industrial all risks policy that also covers accidental damage and machinery breakdown. These are rated and worded individually, so the cover, deductibles and add-ons such as earthquake and terrorism need reading carefully. The same principles apply as for smaller units: insure buildings and machinery at replacement value, declare every location and avoid underinsurance.

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The Missing Piece

Business interruption: the cover most businesses skip

After a fire, the property policy pays to rebuild. It does not pay for the months of lost sales in between, while salaries, rent, interest and loan instalments keep falling due. Business interruption cover, also called fire loss of profit, pays the loss of gross profit and the continuing fixed costs for an indemnity period you choose, typically 12, 18 or 24 months.

• It sits on top of a fire policy. A business interruption claim is generally paid only when the underlying damage is covered by the fire policy.
• Choose the indemnity period realistically. Count the time to rebuild, replace machinery, restart production and win back customers, not just the construction time.
• Base it on gross profit from your accounts, projected forward for growth. Underinsuring gross profit cuts the claim in proportion, just as with property.

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Avoid These

Common fire and marine mistakes

1. Relying on the transporter’s liability

Carrier liability is limited and hard to enforce. Insure the goods yourself and let the insurer pursue the carrier.

2. Choosing restricted cover to save premium

Restricted cover (B or C) leaves theft and most handling damage uninsured, which are the commonest transit losses.

3. Letting an open policy run out

If the agreed amount on an open policy is used up before the year ends, later dispatches may be uninsured. Track declarations against the limit.

4. Insuring property but not profit

A business that survives the fire can still fail during the rebuild. Business interruption cover is what keeps it solvent.

Questions

Frequently asked questions

Does marine insurance cover goods sent by road?

Yes. Marine cargo insurance covers goods in transit by road and rail within India under inland transit clauses, as well as by sea and air.

What is the difference between an open policy and a specific policy?

A specific policy covers one consignment for one journey. An open policy covers all dispatches over a year up to an agreed amount, with the premium adjusted at the end against actual dispatches.

What sum insured should I choose for cargo?

Commonly the invoice value plus freight and other costs of delivery, with a margin of about 10% for incidental costs. The policy wording sets the exact basis.

Is the transporter not responsible for damage?

A carrier can be liable, but its liability is usually limited and recovery is slow. Cargo insurance pays the owner of the risk directly, and the insurer then pursues the carrier.

Which fire policy applies above ₹50 crore?

Above ₹50 crore of assets at one location, businesses buy an insurer’s own standard fire and special perils policy, or an industrial all risks policy for large sites, instead of the standard Bharat Laghu policy.

What does business interruption insurance pay?

It pays the loss of gross profit and continuing fixed costs after insured damage, for the indemnity period chosen, typically 12 to 24 months. It is generally linked to a fire policy covering the same damage.