Yacht insurance is one of those love-hate facts of life. On one hand, some boat owners begrudge the added expense. Yet, when something happens – the vessel drags down on another and causes damage or the boat is sunk in a storm – owners are very glad that their vessel was indeed insured.
"The benefits of insuring your vessel," says Navin Dookeran, technical manager for Guardian General Insurance Limited, in Port of Spain, Trinidad, "is that loss of or damage to your vessel can be costly. With insurance you have the peace of mind that your insurer will be there for you to ensure that your vessel is repaired or replaced."
Yacht insurance is usually of one of two types: liability only and hull and machinery. William Coates, the Cocoa, Florida-based president of Offshore Risk Management, an insurance company with satellite offices in the British Virgin Islands, says, "Liability insurance is relatively inexpensive, but it only insures you against the damages you do to another boat. The other type of insurance is 'hull and machinery' (H&M). This is more expensive, but it covers damage or loss to your vessel."
"Yacht owners with H&M should ensure that their policy is based on the Institute Yacht Clause (IYC), which is the international standard that is accepted coverage for private hulls," says Guardian's Dookeran. "The IYC clause provides coverage for specific perils at sea, fire, hurricane, earthquake, piracy, etc. It also contains a list of exclusions."
Boat owners must carefully review their policy terms to determine not only what is covered, and what is not, but also to learn of what obligations and conditions there are for payment, explains Colin Probyn, account executive with the Theodore Tunick & Co., in St. Thomas, U.S. Virgin Islands. "For example, insurers require immediate notice that contains details that will assist them in investigating a loss. These details include items such as the insured's name, yacht involved, time and place of loss, where the boat may be inspected and any witness information. Failure to give notice to the insurer within the time specified in the policy may be fatal to the claim in the event that the delay is considered prejudicial to the insurer."
Probyn continues, "Protection and Indemnity (P&I) policies are issued to insure owners against risks outside the scope of coverage under standard 'hull' policies. The P&I policy covers a wide range of possible claims including physical injuries or property damage sustained by others, expenses resulting from the rescue of the insured or passengers, removal or destruction of the wreck or debris of the insured vessel. In addition, pollution expense coverage will be found in the P&I portion of the marine policy."
"What boat owners most commonly miss or neglect regarding yacht insurance is timely valuations and surveys," says Guardian's Dookeran. "Surveys are required to ensure that the vessel is seaworthy, however, it is quite expensive and it is hardly conducted by owners. The market price for private hulls, however, fluctuates from time to time and hence owners should always keep themselves informed of these changes. It is recommended that both surveys and valuations are done every three years."
Insurance is available during hurricane season for yachts that stay in the Caribbean. However, says Tunick's Probyn, "Generally a 'hurricane plan' needs to be produced by the owner. In some cases discounts are available for vessels that are laid up."
"Words to look for in the policy related to coverage during hurricanes or named storms," says Offshore Risk's Coates, are 'The Box' and 'Season. The Box refers to the longitude and latitude considered to be in an area at high risk for a named windstorm. Many insurers use the following coordinates: North of 12 degrees 40 minutes North, West of 55 degrees West, South of 35 degrees North, and West of 110 degrees West. Season refers typically to the end of June or beginning of July through beginning or end of November, depending on the individual policy.
If your vessel is located in 'The Box' and you have a loss in a named storm, your policy must say you are covered in 'The Box' for named storms to be covered. However, if you have a 'Box' exclusion and are not covered for named storms and are in Bequia in August, for example, and your boat is a loss due to a fire, you should be covered. If you're vessel is damaged by a named windstorm that is outside of the designated hurricane 'season' stated in your policy, then you likely are covered.
Insurance for hurricane coverage can be expensive. Normally, there is a 15 percent surcharge over policies that don't provide coverage for named windstorms. In addition, most named windstorm coverage policies are subject to a higher deductible, anywhere from double to ten percent of the hull value. Yet, these added costs can be substantially less than totally replacing an uninsured vessel.
Carol M. Bareuther, RD, is a St. Thomas, U.S. Virgin Islands based marine writer and registered dietitian.