1. Contract of Indemnity : The contract of marine insurance is a contract of indemnity. The assured can, in the event of loss recover the actual amount of loss from the insurer. Under no circumstances, the insured is allowed to make profit out of the marine insurance contract, so far Hull insurance is concerned. Cargo policies provide commerical indemnity rather than strict indemnity. The insurers promise to indemnify the insured "in the manner and to the extent agreed."

2. Contract of Good Faith : The contract of marine insurance is a contract of utmost good faith. Both the insured and insurer must disclose everything, which is in their knowledge and can affect the insurance contract. The insured should be truthful and honest in giving information to the insurance company. He is under a duty to disclose accurately all factual information known to him. The insurer should also disclose the facts of the policy to the proposer. If either party does not observe utmost good faith, other party may avoid the contract. So utmost good faith on the part of both the parties is a must.