Complete Guide to Types and Contents of Marine Hull Policies: Don’t Make the Wrong Choice

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In this article, we thoroughly review Marine Hull Insurance—a vital form of protection for ship owners and operators amidst the high risks of shipping in Indonesia and the world. Are you sure that your boat is completely protected?

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Why should choosing a Marine Hull policy be taken seriously?

In the world of shipping and ship ownership, choosing the right Marine Hull insurance policy is not just a formality—but a strategic decision that has a direct impact on business sustainability. Unfortunately, there are still many companies that buy ship insurance policies in a hurry, without fully understanding the contents and structure of the guarantee. As a result, when damage or incidents occur at sea, claims cannot be paid as expected because the type of risk that occurs is not included in the policy coverage.

Each vessel has different characteristics and protection needs. For example, tankers operating on international routes certainly have a much different risk profile compared to tugboats operating in river or coastal waters. Therefore, the choice of policy type, coverage period, and additional guarantee clauses need to be adjusted carefully.

Apart from that, the world of ship insurance has its own terminology and standards such as Institute Time Clauses Hulls (ITC Hulls) and various other variations that are used internationally. Ignorance of these terms can lead to the purchase of an ineffective policy and potentially harm the company financially.

Through this article, we will discuss the various types and contents of Marine Hull policies in full, including policy differences based on time, Institute Clauses coverage, as well as additional guarantees that should be considered. The aim is to help you as a ship owner, risk manager or legal officer so you don’t make the wrong choice and get optimal protection from marine insurance.

Time Policy vs Voyage Policy: Differences and When to Use 

In Marine Hull insurance, one of the most basic things that must be understood from the start is the difference between a Time Policy and a Voyage Policy. The choice of this type of policy will greatly influence the premium structure, protection period, and flexibility in ship operations.

1. Polis Time (Time Policy)

This policy provides protection for the vessel for a specified period of time, generally 12 months, although it can be adjusted. Time policy is very suitable for ships that operate continuously and commercially, such as cargo ships, tankers, passenger ships, or tug and barge fleets.

The main advantage of this policy is flexibility: as long as the policy is active, the ship is covered even if its route changes, as long as it is within the approved shipping area (navigational limits).

Suitable for:

1. Regular commercial ship owners
2. Shipping company
3. Boat charter operator

2. Polis Voyage (Voyage Policy)

This policy is only valid for one particular trip, from port A to port B. Voyage policy is often used for ships that only make occasional voyages, or for special purposes such as sending ships from a shipyard to an operational port, new ships, or ships in repositioning transportation.

Superiority:

1. The premium is paid for only one trip
2. Suitable for short term or special needs

Suitable for:

1. One-shot project
2. New ship from shipyard to owner
3. Short term boat charter

Choosing the Right One

The choice of policy must be adjusted to the frequency of operations, type of cargo, shipping area and the ship’s risk profile. In many cases, large fleet owners prefer the Time policy because of its ongoing protection, while Voyage is preferred by project companies or individual vessel owners.

Discussions with brokers are very important at this stage so that your protection needs are not only met, but also cost efficient.

Institute Hull Clauses (ITC) A, B, C, War & Strike Explained 

After determining the appropriate type of policy, the next thing that the ship owner or risk manager must understand is the Institute Hull Clauses (ITC). This is the standard international clause used in Marine Hull policies, and specifies what risks are covered in the policy.

There are several main types of clauses, each with different levels of coverage. Choosing the right clause will have a direct impact on your risk protection and premium value.

1. ITC Hulls – Clause A (All Risks)

Often referred to as the “All Risks Clause”, ITC Hulls A offers the broadest protection. This policy covers almost all physical risks to the vessel, except those explicitly excluded. Very suitable for high value vessels, or those operating in vulnerable lanes.

Guaranteed examples:

1. Fire
2. Explosion
3. Collision
4. Run aground
5. Extreme weather
6. Accident due to crew negligence

2. ITC Hulls – Clause B & C

Clause B offers more limited coverage than A, and C is even more limited. These two clauses are more often used for smaller vessels or operating in relatively safe areas, with lower premiums. However, there are more risks that are not guaranteed.

3. Institute War Clauses (Hulls)

This clause protects against the risks of war, including:

1. Hostile acts between countries
2. Military attack
3. Sea mines
4. Torpedoes, nuclear weapons, etc

Usually sold separately from the main policy, because these risks are very specific and fluctuating.

4. Institute Strikes Clauses (Hulls)

This clause protects the ship from losses arising from:

1. Workers strike
2. Hair-sin
3. Acts of terrorism or sabotage related to social conflict

Conclusion: 

Understanding and selecting the right ITC combination is a key step in optimizing ship protection. Consultation with a broker will help you arrange an appropriate policy structure without paying excessive premiums.

Warranty Expansion (Add-On): War Risk, Loss of Hire, etc. 

In addition to the basic coverage in a Marine Hull policy based on the Institute Hull Clauses, ship owners and shipping operators can also add additional coverage (add-ons) according to their needs and business risk exposure. This add-on is optional, but can be very important especially if the ship operates in certain high-risk areas or conditions.

The following are some popular add-ons in Marine Hull insurance:

1. War Risk (Institute War Clauses)

Covers losses resulting from war, acts of hostility, government confiscation, and other perils not covered by the main policy. This add-on is very important for ships sailing to conflict-prone areas such as the Middle East, the Red Sea, or disputed areas.

2. Strikes, Riots, and Civil Commotions (SRCC)

Protecting ships from losses due to labor strikes, social unrest, sabotage, or terrorist acts affecting port or ship operations. This is very important for ships that often call at ports with high socio-political risks.

3. Loss of Hire (LOH)

This extension covers loss of income due to the ship being unable to operate due to damage covered in the main policy. For example, a ship is damaged in a collision and must be repaired for 30 days—then the owner will receive compensation for lost income from charters or operations.

4. Increased Value (IV) / Disbursement

Provides additional protection beyond the ship’s main insurance value. Usually used to cover additional value such as lost profits or indirect costs arising from damage.

Adding extended coverage is a smart way to fill gaps in your primary policy’s coverage, and ensure your business continues to run smoothly even in emergencies.

Policies for New Boats vs Old Boats: Differences & Strategies 

One important aspect in preparing a Marine Hull policy is the age of the ship. Both new and old ships have different risk characteristics, which directly affect the policy structure, premiums and additional requirements of the insurer.

1. Kapal Baru (New Build or Recently Delivered)

1. New ships generally have lower technical risks because:
2. Machines and equipment are still in prime condition
3. Class certification is still in full force and effect
4. The latest designs and technology are used

Protection strategy:

1. Use standard Marine Hull policy + War & Strike if necessary
2. Consider additional protections such as Loss of Hire, as new vessels are usually fully contracted
3. The insurance value can refer to the purchase price or shipyard contract

2. Older Vessel

Vessels over 15 years old begin to face additional risks such as:

1. Technical breakdowns are more frequent
2. Decreased engine performance
3. Potential rejection from certain ports or financing

Challenge:

1. Higher premiums (due to risk loading)
2. The insurance company may ask for a special survey (condition survey)
3. Larger deductibles may apply

Protection strategy:

1. Make sure the boat is in good condition and checked regularly
2. Use a broker to negotiate coverage that remains competitive
3. Add protection such as Machinery Breakdown if available

With a different approach to new and existing ships, you can structure a policy that is not only financially viable, but also relevant to real conditions on the ground.

How to Determine the Correct Insured Value 

Determining the insured amount (sum insured) in a Marine Hull policy is not just about plugging in numbers—it is a strategic process that requires a thorough evaluation of the actual economic value of the vessel, as well as projections of potential losses that may occur. Mistakes in determining the insurance value can result in underinsurance (the insurance value is too low) or overinsurance (the value is too high), both of which are detrimental to the ship owner.

1. Market Value (Market Value)

The most common way is to use the current market value of the ship. This value can be obtained from:

1. Final purchase contract
2. Independent assessment (marine appraisal)
3. Prices of similar vessels in the international market

This approach is suitable for vessels that are already operating commercially and have transaction data available.

2. Book Value (Book Value)

Many companies use book value from financial statements as a reference. However, this approach does not always reflect actual replacement value, especially for vessels that have been in service for a long time.

3. New Replacement Value

Used primarily for new ships or in building projects. This value reflects the costs of building or purchasing a new ship with the same specifications, including transportation costs, import duties and installation.

4. Adjustment Factors

Worth considering:

1. Residual value of the ship (residual value)
2. Salvage value if total damage occurs
3. Technical or commercial depreciation

Recommendation: 

Use the services of an independent appraiser and consult with your broker so that the insurance value reflects the true value, avoids disputes during claims and ensures optimal protection.

Wrapping Up: The Right Policy Protects Your Business Without Loopholes

In the shipping business, policy Marine Hull Insurance Appropriate management is the primary foundation for asset protection and operational continuity. Understanding the differences in policy types, choosing the appropriate Institute clause, and carefully compiling the insurance amount is not something that can be ignored or done haphazardly. One small mistake in risk placement can result in large losses when a claim is filed.

With guidance from an experienced insurance broker like L&G Insurance Brokers, you don’t just purchase a policy, but get a comprehensive protection solution tailored to your fleet’s specific needs. We are ready to help you navigate the complexities of policy documents, ensure complete coverage, and assist you in the claims process so that everything runs smoothly.

Remember, insurance is not about avoiding risk, but how you manage it wisely. Don’t let your business be exposed to loopholes that could have been prevented from the start.

Looking for insurance products? Don’t waste your time and contact us now

HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)

Website: lngrisk.co.id

Email: oktoyar.meli@lngrisk.co.id

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