Editor’s Note: Mike Smith from Global Marine Insurance Agency submitted this post.
Bareboat, time share and fractional ownership charter boats are becoming more and more popular. With the time crunch of families, the cost of purchase and maintenance, finding a slip and all the other costs of ownership, putting your boat into a bareboat charter fleet is a way for boaters to enjoy their love of the water while reducing expenses.
Anyone owning a time share, bareboat or fraction of a vessel should understand the insurance issue, which is serious if not properly handled. There are very few insurance companies or agents who fully understand and can properly cover these unique exposures.
For instance, who is the named insured, who is an additional insured, who gets the check if there is a damage claim? What limits should be carried, and how is the deductible handled? Only experienced agents know the answers to these questions, because there are many ways to cover these exposures—some better than others.
A properly written policy clearly states that the policy covers whatever type of ownership is present. Typically the named insured is the titled owner of the vessel. Additional insureds should include: the charter management company, the time share or fractional ownership management company, the operator of the vessel, and a paid captain or instructor if applicable. This way if a large liability claim occurs, one insurance company defends all stakeholders and pays on their behalf if negligence is proved.
Some companies’ policies cover defense costs within the policy limits and the better policies cover defense costs above and beyond policy limits. At least $1,000,000 Protection & Indemnity liability and Jones Act coverage for any paid crew or instructors is recommended.
Typically hull damage deductibles are kept at 1% of the insured value so that operators have some skin in the game, but not so much that it scares them away from chartering. There are exclusions in any yacht policy and that holds true for “commercial” use charter policies as well. They are not meant to be maintenance policies, so be aware of what isn’t covered and be prepared to face the consequences if an uncovered loss occurs.
There is risk in almost any activity we undertake, and boating is no different. Talk to a knowledgeable and experienced agent who understands the business model and who the stakeholders are; that agent will know how to properly cover those exposures that can be insured.
From a charterer’s perspective, it is very important to understand that you do not have liability coverage unless it is included in the vessel’s policy. A homeowner’s policy does not cover non-owned, rented or chartered vessels. If you have your own yacht insurance policy there are only three companies that offer the appropriate liability: BoatUS, Seaworthy, and ACE. Only ACE offers it automatically, so you have to purchase the extra coverage for any BoatUS or Seaworthy policy.
If you bareboat charter you could be sued for any injury or damage you cause, so make sure you are protected.