Here are some key points to look for in a boat/yacht policy. Let’s start with Agreed Value Hull & Equipment. The coverage under the physical damage portion of the policy should be what is termed “Agreed Value”. This provides the boat owner with the assurance that if there is a total loss whatever value appears on their declarations page, as the Agreed Value, is what they will receive (usually) without a deductible on total losses.
Warranties are an important consideration and a policy should include the appropriate Navigation and Lay Up warranties. For Navigation this is a promise made by the boat owner that they will only navigate within the stated policy limits. If this warranty is breached an insurance company may deny a claim. Many policies contain a Lay Up Warranty, which states if you agree to lay the boat up for a certain period of time the company will give you a premium credit, but you cannot use the boat during that time. If you do and a loss occurs there is no coverage. The liability coverage for storage stays in place, but no coverage for operation. In the winter, boats in the northern part of the country are usually laid up for four to six months. This is one reason insurance rates are lower there than elsewhere in the country. If an owner wants to launch their boat earlier than the layup date, then they can call their agent and reattach the full operational insurance.
The industry standard yacht policy always includes what is termed “Protection & Indemnity Liability” or P&I. P & I includes all of the required liability coverage including bodily injury, property damage, wreck removal, U.S. Long Shore & Harborworkers Act and Jones Act coverage. Harbor Workers & Longshoreman coverage provides waterfront workers compensation for dock workers who might be injured while temporarily working aboard the insured yacht. Jones Act is another federal law that requires vessel owners to provide paid seaman workers compensation for injuries that might occur while in the “service of the ship”. The best policies provide defense costs above and beyond the stated limits but there are good policies that include them within the stated limit. Limits should be high enough to protect the owner’s individual assets. Today’s norm is $500,000. Pollution liability is also very important and additional limits are preferable compared to being included in the P&I limit.
Take a careful look at the exclusions. Exclusion is a peril that is not covered and they vary greatly by each insurance company. Examples of exclusions include wear and tear, gradual deterioration, osmosis and de-lamination. Some policies contain 15 or so very typical exclusions, some companies have up to 35 or more. This can make a huge difference in the “value” of one policy over another. While there can be a price difference from one policy to another; typically they don’t vary that much when the difference in value is considerable. Some of these exclusions leave the door open for companies to exclude large losses for the same premium.
Ideally a policy should be underwritten by a large financially sound marine insurance specialty company. Those companies, who do not specialize in marine, may not understand the unique exposures present and may not provide the important coverage’s needed. Marine specialty companies adjust their claims with experience marine adjustors and/or surveyors while some non-marine specialist companies use auto adjustors.
By: Mike Smith
Executive Vice President
Global Marine Insurance Agency
Global Marine Insurance Agency is solely dedicated to providing insurance coverage to members of the boating community. Let us help you protect your investment. Get an online quote today…