Sail without a careThe weather is light, and it’s that time of the year when a

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 coverageInsurance 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.

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.

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 damageThe 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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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 f loating 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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exclusIon or acTIvITIes noT coveredMost 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

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 cosTUnderwriters 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.

conclusIonNow 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.

Since boat liability insurance is not mandatory

in many countries, there are many boaters operating without liability coverage.

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