Insurance is a must for boat owners and equally important is knowing how it works. In this section we try and give you a better understanding of how your marine insurance policy works.
There are two basic sections to a yacht and boat policy. Hull and liability. The Hull 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 equipment on board that are required to operate the boat.
The liability section, sometimes referred to as Protection & Indemnity, covers your legal obligations to third parties. This legal liability can arise from bodily injury or loss of life, or damage to someone else's property, as a result of the ownership or operation of your boat. Liability coverage also helps pay for your legal defense if you are sued for a liability that may be covered under your boat insurance.
Hull damage coverage generally pays for repairs to your boat that are necessary as a result of damage caused by a wide range of perils. 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 your boat while it is stored on land, or while you transport your boat over land by trailer.
The boat owner has the responsibility to maintain their boat, as normal wear and tear is often excluded under a boat or yacht policy.The number and type of physical damage exclusions vary from company to company, so take time to avoid surprises later.
When comparing physical damage coverage, the most significant difference that can be found amoung boat or yacht insurance policies is whether the coverage is based upon "agreed value" or "actual cash value" (ACV) loss settlement. Agreed value policies normally pay the amount shown on the policy if the boat is considered to be a total loss. Under such a policy, damage resulting from a partial loss is generally paid for on a replacement cost (new for old) basis, less your deductible; that is, physical depreciation will not be factored into determining the value of the lost or damaged items. However, some items that are subject to higher amounts of normal wear and tear, such as canvas, sails, trailers and some machinery, may be subject to allowance for depreciation in the event of a covered loss.
An actual cash value policy provides less coverage than an agreed policy, but generally at a lower cost. 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 the loss. Payments made for partial losses are usually reduced based upon physical depreciation of the lost or damaged items, and the policy deductible is also applied.
Most Marine insurance companies will issue two hull deductibles. One is a standard hull deductible. This deductible will be applied to every loss that occurs with the acception of damage caused by a hurricane. The second deductible is a hurricane deductible. This deductible will only be used for damage caused to the yacht caused by a hurricane or Named Windstorm. Hurricane dedcutibles are usually double what the standard hull deductible is. Older yachts will receive a higher dedcutible then a new boat. Most standard deductibles are usally 2 to 5% of the insured value of the yacht and hurricane deductibles are doubled to 4 to 10% of the insured value the yacht.
THIRD PARTY BODILY INJURY PROPERTY DAMAGE
This part of the policy covers you for any property you might damage that is outside of or off of your boat. If you were to damage a pier you were docking at, you hit another boat, run over a mooring ball. Third Party covers you for damages to property you damaged through negelegenc on your part. The bodily injury apples the same way under Third Party. Any person off the boat that you may hurt through negeligence on your part would be covered.If you ran over a water skier, swimmer or hurt somebody at dock when docking this would all be covered under Third Party.
This part of the policy covers you if one of the passengers on your boat were to get hurt through negelegence on your part. Keep in mind this is a legal liability policy so for in order for your insurance to cover an injured passenger it would have to have been your fault on them getting hurt. If it was not your fault and your passenger filed a law suit against you your insurance policy would provide you with attorneys to defend you and pay their legal fees.
You should verify that your policy has an adequate limit of coverage for Medical Payments.
Medical Payment coverage will pay for first aid treatment, ambulance, hospital and other costs
that result from someone being injured on your boat, even if you are not legally responsible. It is
important to ascertain whether the coverage also applies while someone is boarding or leaving
boat, and while being towed behind your boat, such as while water skiing. Check to make sure that
injuries to you and your family are also included in this coverage. Given equal amounts of
insurance, coverage on a "per person" basis may be preferable to coverage on a "per accident"
Personal Property coverage includes such items as clothing, personal effects, and sports and fishing equipment belonging to you or your family while those items are being loaded/unloaded and while aboard your boat. Similar to physical damage coverage, there are exclusions that vary from company to company, so it pays to compare.
An Additional Insured is a person or organization that enjoys the same benefits as the named insured. The term generally applies within liability insurance and property insurance, but is an element of other policies as well. Most often it applies where the orginal named insured needs to provide insurance coverage to additional parties so that they enjoy protection from a new risk that arises out of the orginal named insured's conduct or operations. An additional insured often gains this status by means of an endorsement added to the policy which either identifies the additional party by name or by a general description contained in a "blanket additional insured endorsement".
In your yacht and boat policy you will have exclusions written throughout your policy. Exclusions are items or areas that will not be covered under your marine policy. Exclusions are written into both the hull and liability of your policy. It is very important that you know this area of your policy. The Exclusions will be clearly marked and spelled out in the various sections of oyur policy.
All insurance companies vary on who is covered when operating the boat. Some allow anyone one who is capable to be covered while operating the boat while other insurance companies go on a named Operator basis. A named operator basis means the operator has to be specially named on the policy to be covered. It is very important that you know who is covered when operating your boat as if they are not approved and a claim occurs there is a good chance your claim will be denied.
All marine polocies have a Navigational area spelled out on your policy. The Navigational Area is the area that you are covered to operate your boat in. It is very imprtant you know the area you are covered to operate in as if a loss occurs outside of this area there is a good chance your claim will be denied.
A Declaration Page is the portion of an insurance policy that lists your detailed information. For instance a declaraiton page will list your name, home address, policy number, the effective and expiration dates of your policy, the premium for the coverage you have aquired and the limits of each coverage.
There can be situations where changes need to be made to the standard policy language, coverage or terms. Instead of rewriting the entire policy, the insurance company includes or will issue endorsements to the policy. Endorsements are basically adjustments made to the insurance contract. Your Declaration Page will list which endorsements apply to your policy. The insurance company or the Named Insured can request an endorsement be made to the insurance policy.
All Yacht or Boat policies have an use written in to the policy. The Use will be determined how you use your Yacht or Boat. There are 2 Uses. One would be for owners who strictly use their Yacht or Boat for Pleasure use and the other use would be for use thier Yacht or Boat for Charter use. Charter use would include Term, Daysail, Bareboat or Instruction. It is very imprtant your policy is written with the correct use.
The above information will hopefully give you a little better understanding of how a marine insurance policy works. If you are never sure about something please contact your agent to get clarification. If we can be of any help please feel free to contact us at your convenience.