Marine losses can be divided into two board types.
1. Total Loss
(a) Actual Total
(b) Constructive total Loss
2. Partial Loss
(a) General Average
(b) Particular Average
(c) Salvage Charges
1. Actual Total Loss
The actual total loss takes place when the cargo or ship insured against the perils of sea is totally destroyed. An actual Total loss also occurs when the insured losses the possession of his property. The amount of total will be paid by the underwriter on all policies issued on that ship.
Examples of total loss
(i) If the ship is sunk in the sea.
(ii) If the ship is burnt to ashes.
(iii) If the ship is captured by an enemy.
Constructive total loss
A constructive total loss is declared when the Property becomes useless for all practical purposes. It also occurs where the subject matter of marine insurance is damaged to such an extent that the expenditure of repairs will be equal to or even more than the value of property. Notice of abandonment must be served in writing to insurer in case of such loss.
2. Partial Loss
(a) General average
A ship sailing in the open water faces some perils. Ship masters have to incur several expenses in order to carry ship cargoes safely to their destination. For example deck cargo is thrown into the sea during a heavy storm for the safety of the ship. As the loss is the result of a voluntary sacrifice, incurred in time of need so all ~ the interested parties bear a share of the loss.
(b) Particular average
Particular average refers to partial loss which must be borne by the particular party that suffers the losses. There are not incurred for the common benefit but are result of the accident or carelessness. Such is damage by sea water or fire, stranding. If some bales of cotton are damaged by fire It is particular average.
(c) Salvage charge
Salvage is payment by the owner of property to other person for saving cargo or ship from damage. Sometimes the ship is in danger on the sea and it is saved from the loss or damage by third party. Such party, therefore has right to receive reward from the owner in exchange for its efforts. If the owners refuse to pay salvage, the third person can enforce a claim in the competent court according to the maritime laws.