Insuring our Yacht is like insuring our home. We must
protect our investment and the banks financial interest. Boat insurance policies
have two common forms. Runabout for boats under 26’and Yacht form for 26’
plus. Ninety five percent of all Carvers will qualify for the Yacht form;
therefore I will limit discussion to the yacht form.
Our first concern is no one controls yacht policy forms.
For the most part yacht forms are unregulated by state insurance
departments. This allows each company to produce coverage language and
definitions differently. A review of the most troublesome sections on your
policy follows. Most of these concerns can be fixed. Some cause coverage
problems and some provide premium discounts that add warranties to policy.
Review the definitions section of your policy. Understand “insured property”. Insured property includes “your yacht, personal effects, and unattached equipment and accessories”. Every policy has its own definition and limit. You should purchase a limit to match your exposure for each coverage section.
Next review and understand “AGREED VALUE”. If your policy is Actual Cash Value or mentions depreciation under payment of loss its time to change. Note that several items are depreciated on all known forms. They include sails, canvas, bottom paint, cushions and batteries. Depending on company many forms have built in depreciation clauses, as the boat gets older for outdrives, engines and gel coat. I will not mention any specific companies but some of the largest markets have included depreciation.
TOTAL LOSS! This definition is very important. Most forms state if repair is more than insured value company will at their option declare a total loss. We have one company that helps in this wording. Total loss includes cost of repair plus salvage value of the boat. This can be a big benefit to the boat owner. For example with standard wording if you have a $100,000 boat policy and have a $60,000 fire or water loss the boat would be repaired. Not only would boat be repaired but you are out of boating while boat is in repair shop. We have seen a boat take 12 months for repair. If you have the second policy form, which includes salvage value, and boat still has $40-50,000 value (which is very common) the policy would declare total loss and cut you a check for the agreed value limit.
LAY UP WARRANTY! Please keep an eye on this. Lay up provides a premium discount but voids coverage if loss occurs at sea during lay up period.
NAVIGATIONAL WARRANTY! This warranty limits your territory of operations. Like Lay Up it will void coverage if loss occurs outside policy territory. Both navigational and lay up warranties can be adjusted during the policy term if your plans change.
PRIVATE PLEASURE WARRANTY! This form voids coverage if you charter, hire or carry persons for a fee.
LAND TRANSPORTATION WARRANTY! Limits location and distance boat can be transported over land without prior company approval.
HALON/CO2
WARRANTY! The wording of this could void coverage if fire loss occurred and
system did not work properly.
Beyond the mentioned hot points in yacht forms most
policies have improved regarding salvage coverage. Most forms now cover salvage
expenses up to the agreed value limit as a separate limit of coverage. I’m
sure everyone has seen articles on tow companies and the good and bad stories.
Limiting this exposure is important. Forms are available that can be signed
prior to service rendered to limit some of the large bills we’ve seen or heard
about.
Another coverage concern is the hold harmless wording showing up in marina contracts. Yacht forms are 50/50 when it comes to covering your boat damaged by a marina while in their care/custody or control. As with all hold harmless agreements the courts are having fun with this one. The marina industry in an effort to control their insurance premiums is using this wording. Two major yacht forms have fixed exclusion and balance should follow. This has not been problem in Great Lakes but I’m sure it will be here soon.
Other important coverage to look for on your policy includes:
· Protection & Indemnity (buy high limits) be careful your personal umbrella policy may have exclusion for the boat.
· Longshore & Harbor Workers Compensation
· Oil Pollution Liability
· Uninsured & Underinsured Boater
· Medical Payments
· Emergency Towing & Assistance
· Lower Deductibles on Electronics
· Tender Coverage
·
Hurricane Protection Coverage
The Yacht Insurance market is strong. While other
sections of the insurance industry were taking 20-50% rate increases the yacht
market that Carver owners are in has been stable with only minor price
increases. Factors that affect rates include value, experience of operator, loss
history, education, location of yacht, lay up period, type of fuel, equipment on
board, age of vessel and policy form.
If anyone would like more information feel free to
contact me at (716) 683-4110 or mh1ins@aol.com
Safe Boating
Mark D. Hoey CIC