1. Sail without a care
The weather is light, and it’s that time of the year when a
Risk is everywhere, and the sea is no different. Aftab Hasan explains what factors should
be considered before deciding on an insurance policy for yachts and boats.
spin around the marina is an enjoyable experience. But
even a small cruise is not without its risks. This article
will describe the basic coverages that are available under
“Boat or Yacht Insurance” policies and the factors that should be
considered to make informed choices.
Insurance coverage
Insurance coverage is more or less the same with minimal variance
from company to company for all class of insurance; but is not
necessarily true for boat and yacht insurance. Most of the marine
insurers providing boat and yacht insurance offer a wide range of
coverage suited to their company’s level of expertise, underwriting
appetite and type of customers they wish to attract. Boat insurance
programs are normally designed to cover boats up to 26 feet in overall
length. If the size of the vessel is greater than 26 feet, it’s generally
considered a “yacht” and therefore qualifies for yacht insurance.
There are two main sections of a boat or
yacht insurance policy: Physical damage
and Boat Liability classified under Section
1 which generally covers Hull & Equipment
and Section 2 which covers Protection &
Indemnity Liability. There are additional sub
sections such as medical payments, personal
effects, uninsured boaters, towing, among
others. There are also special endorsements
such as charter, extended navigation, trip
coverage, etc.
Physical damage
The physical damage section covers
accidental loss or damage to the boat and
its machinery. This not only covers the hull
and the engine(s), but also the sails and other
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2. An ACV policy provides less
coverage than an AAV policy,
but generally at a lower cost.
While an agreed value policy typically costs
more and provides broader coverage, an
actual cash value policy may provide an
economical alternative.”
Aftab Hasan, CEO, ARYA
Insurance brokerage
CO. LLC
equipment on board that are required to
operate the boat. The best policies provide
“all risk” coverage, which means that if the
cause of loss is not specifically excluded, it
is covered. Typical causes of loss that are
covered include: weather-related perils
such as wind, rain, hail, lightning and
wave action; fire; loss or damage caused
by theft or vandalism; and collisions with
docks, submerged or floating objects or
other boats. It is wise to select a policy
that continues to cover the boat while it is
stored on land, or while transporting the
boat over land by trailer. This coverage is
broad, and provides coverage for the boat,
including its machinery and auxiliary
equipment, outboard motors, boat trailer
and personal property.
A boat insurance policy can provide
physical damage coverage on an Actual Cash
Value (ACV) or an Agreed Amount Value
(AAV) basis. Both types of boat insurance
policies offer important coverages for the boat
trailers and aged outboard motors, lower drive units or outdrive.
Physical damage coverage is usually subject to a deductible. The
deductible is the amount you are willing to pay in case of a loss.
The thumb rule similar to all insurance classes applies for boat
or yacht insurance as well – the higher the deductible, the lower
the insurance premium.
An ACV policy provides less coverage than an AAV policy, but
generally at a lower cost. While an agreed value policy typically
costs more and provides broader coverage, an actual cash value
policy may provide an economical alternative. An ACV policy
provides coverage up to the current market value of the vessel in
the event of a total loss, taking into account depreciation and the
condition of the boat at the time of loss.
Exclusion or activities not covered
» Normal wear and tear
» Operation outside defined navigational area
» Chartered, leased or used for any commercial purposes or exchange
» Racing or speed testing
Note: Exceptions can be made but only in writing by a duly
authorised and signed endorsement to the policy. The number
and type of physical damage exclusions vary from company to
company, so take the time to compare to avoid surprises later.
Boat liability
The Liability section of the policy provides protection if you are
legally responsible for damages to property or injury to someone
other than yourself or a family member. Boat Insurance liability
provides protection if you are sued as a result of hitting another
boat or if someone is hurt onboard your vessel because of your
negligence. The liability section of a comprehensive boat insurance
policy provides much coverage that is important to boat owners.
Coverage for the removal or disposal of the wreck of the boat
is important to have, especially if the wreck is deemed to be a
hazard to navigation. Boat owners may also be responsible for any
containment and clean-up expenses resulting from oil pollution
or contamination caused by their vessel. It’s important that the
insurance policy covers liability for those clean-up expenses,
which could add up to a considerable amount. If you ever intend
to borrow someone else’s boat, confirm that your liability coverage
extends to the other boat. This is called “non-owned” boat liability
coverage. Finally, boat owners who employ paid crew members
should ensure that their policy covers their liability to the crew
under the General Maritime Law. A good policy will also provide
a separate coverage for your statutory liability to temporary shore-based
workers, such as a mechanic or marina employee, if they
become injured aboard your boat.
but there are significant differences which is
important for a policy holder to understand
before purchasing the insurance policy.
ACV policies pay for replacement costs
minus depreciation at the time of the loss.
In the event of a total loss, used boat pricing
guides and other resources are used to
determine the approximate market value
of your vessel. A partial loss is settled by
taking the total cost of the repair minus a
percentage for depreciation.
AAV policies signify that the policy
holder and the insurance company have
agreed on the value for the vessel and in
the event of a total loss that amount will
be paid out. AAV policies also replace old
items for new in the event of a partial loss
without any deduction for depreciation.
Most policies of this kind require actual cash
value on certain damaged property such as
sails, protective covers, batteries, dinghies,
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3. Exclusion or activities not covered
Most boat and yacht policies exclude coverage while the boat is
chartered to someone else or used to carry passengers for a fee.
Under the right circumstances a good marine insurance company
may extend coverage to include those situations.
Additional sub- sections
Medical payment coverage: The medical payments section of the
policy provides protection for reasonable medical, ambulance and
hospital costs should someone be injured while in, upon, boarding
or leaving the boat even if one is not legally responsible. Check
to make sure that injuries to you and family are also included in
this coverage. Also verify that the policy has an adequate limit of
coverage for medical payments. Given equal amounts of insurance,
coverage on a “per person” basis may be preferable to coverage
on a “per accident” basis.
Personal property coverage: This covers personal effects and
guests are automatically insured for up to a defined limit while
stored on the boat such as clothing, personal effects, and sports and
fishing equipment while those items are being loaded/unloaded
and while aboard the boat. However, coverage does not include
high-value portable items. Some marine insurers also offer the
option of buying a normal Tenants Insurance Policy for personal
property on the boat. This policy includes worldwide coverage for
personal belongings while away from the boat and it also provides
worldwide personal liability insurance coverage with a defined
limit. This covers for liability arising from other activities away
from the boat.
Uninsured boater coverage: Since boat liability insurance is not
mandatory in many countries, there are many boaters operating
without liability coverage. It is designed to compensate for injuries
to persons aboard the boat that are caused by an operator of
another boat who has no liability insurance. For example, if you
Since boat
liability insurance
is not mandatory
in many countries, there
are many boaters operating
without liability coverage.
are legally entitled to recover damages from
the other uninsured boater, or if you or your
guests on your boat are the victims of a
hit-and-run boater who cannot be identified,
this coverage can help ease the financial
impact of those injuries.
Towing coverage: This coverage reimburses
for the costs incurred when availing of
emergency assistance for the boat, and you
and your boat are not in immediate danger.
The policy covers emergency towing at
any time to secure or keep the vessel safe;
however, this coverage is normally subject
to the policy deductible for the hull and
machinery section.
Special endorsements
Most boat and yacht policies exclude
coverage while the boat is chartered to
someone else, or used to carry passengers
for a fee. Under the right circumstances,
a good marine insurance company may
extend coverage to include those situations.
Factors affecting cost
Underwriters consider many factors when
determining the rate (or premium) to charge
for a boat or yacht policy. The most common
determinants are: value, length, age of boat,
type of boat, type of engines, intended area
of navigation, previous boating experience,
claim history of the owner and deductible
amount. The most common way to reduce
the cost is to select the highest deductible
amount that you could affordably pay
out of pocket in the event of a loss. Good
condition of the boat also helps in receiving
competitive terms from insurers.
Conclusion
Now that some of the key elements of boat
and yacht insurance policies have been
described, this should ensure one is in a
better position to ask the right questions
when buying marine insurance. It is also
wise to work with a company that thoroughly
understands boat and yacht insurance. This
is important not just at the time of applying
for insurance but also in the unfortunate
event of a claim.
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