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The Right Insurer and the Best Policy

Did you know that the true yacht insurance policy is probably the most comprehensive insurance policy you will ever own. Today's yacht insurance is a hybrid of coverage types and philosophies, which have been handed down from the very beginnings of insurance in England, in the sixteenth century.

Sailboat Insurance Checklist

  • Is my hull and equipment coverage at an agreed value on a total loss?
  • Is my hull and equipment coverage replacement cost on partial losses?
  • Does my policy carry a named storm deductible?
  • Is my dinghy scheduled?
  • Are sails, batteries, outboard and canvas coverings depreciated at time or loss?
  • Does my policy depreciate gelcoat and or paint?
  • Are my policy "all risk" perils insured (see exclusions listed below)?
  • What is my land transportation limit?
  • Does my policy include latent defect coverage?
  • Does my liability coverage include wreck removal?
  • Does my liability coverage include pollution?
  • Does my policy provide a separate limit of liability for pollution?
  • Does my liability policy cover Jones Act and Harborworkers Act?
  • Do I understand my navigation warranty?
  • Do I understand my lay-up warranty?
  • Do I understand my private pleasure use warranty?
  • Are my liability limits high enough for Jones Act and wreck removal?
  • Am I insured for the proper value (current market value)?

A typical yacht policy comes in two main sections: Section I or A is generally hull and equipment coverage, with Section II or B liability or protection and indemnity (P and I). There are also additional coverage subsections, such as medical payments, personal effects, uninsured boaters and towing. In addition, there are special endorsements which may be added, such as, charter coverage, extended passaging, trip coverage, etc,.

Hull insurance is all risk-direct damage coverage, thus a very broad insuring agreement. However, every policy has exclusions, and these can vary greatly from company to company. You should be aware of what is not covered. Some of the more typical exclusions are: wear and tear; gradual deterioration; damage from insect, marine life, animal, mold; marring, denting and scratching; osmosis and blistering; electrolysis; manufacturer's defects; design defects; damage while chartering; freezing damage.

Some companies have seen fit to include these significant exclusions: damage occurring while the boat is being serviced; damage while the boat is being transported overland more than 50 or 300 miles from home port; latent defects; damage occurring while the boat is being used in conjunction with business, to name a few.

True yacht insurance will include agreed-amount hull coverage. This means that at the time the policy was written, the value of the sailboat is agreed to by all parties, and that is what is paid on a total loss. The true yacht policy also includes replacement-cost (new for old) coverage on partial losses, with the exception of sails, canvas, batteries and machinery (engines), which are depreciated. Some companies will also depreciate gelcoatings. These depreciated items can add up to a lot, so know which ones apply to your policy.

Know the warranties in your policy. These covenants, which you agree to with the policy, can include: an of navigation area, lay-up period, private pleasure use and that the boat is seaworthy when leaving port. Should you not abide by these, coverage can be voided.

Protection and indemnity (P and I) insurance is the broadest of all liability for sailboats. This is not an exposure that should be covered by your homeowner's policy or a stripped-down boatowner's liability. Maritime law is unique making it necessary to have coverage for this exposure. Harborworkers and Longshoreman's coverage and Jones Act (crew) coverage can be critical and may not be covered by some companies' boatowner's policies. Uncovered losses in this area could run into hundreds of thousands of dollars. In addition to providing payment of judgments against you, P and I also provides for your defense in admiralty courts.

In today's world of specialists, the marine insurance field is not different. Yacht insurance is a specialty. Concern should, of course, be for the company's solvency. Should an insurance company become insolvent, your loss could be uncovered, or you many not receive any returned premium for the canceled policy.

To receive the best value for your policy, be an informed buyer. Your local agent my be a friend or relative, for example, and do a great job on your other insurance needs, but he or she may not be the best agent to serve your sailboat insurance needs. Ask questions; know what you're buying.

You should realize that it's important for you to be a good risk for the company. Obviously, completion of a safe-boating course or a charter certification from a learn-to-sail program can be a strong indicator of your boathandling and sailing abilities to an insurance company. Fire extinguishers need to be on board. There's no substitute for ownership and the experience it brings. A well-equipped boat with an experienced skipper demand the lowest price. All of these aspects will affect the amount of the premium.

It is also important that the boat be in good condition. If you're buying a used boat that is more than 8 years old, you'll probably need a survey in order to obtain insurance. Insurance carriers will expect proof that any survey repair recommendations have been executed.

Like most sailing gear, when it's needed, the best is never too good. Sailboat insurance is an expense of sailing, so make sure it adequately covers your sailboat.

Michael J. Smith, an avid sailor, is marine vice president with Global Marine Insurance Agency, located in Traverse City, Michigan.

Guidance on Making a Claim

What is the process of making an insurance claim. Here is a quick list of the steps, including a few tips, needed to make a claim on your insurance coverage.

  • If your claim is a theft loss or involves other people or other boats, make sure you have reported it to the local police or the Coast Guard. Provide a copy of that report as soon as possible, and obtain the names, addresses and phone numbers of other parties involved, or the boat registration numbers. Fill out the statement of loss, or master's protest as it is known, and notarize your signature before returning it to the insurance company.
  • Take the necessary steps to prevent further damage. Failure to do so may result in all or part of the claim being denied or reduced. Your insurance company will pay for reasonable costs incurred for this. Move your boat to the nearest repair facility of your choice if possible.

  • Have the facility prepare a written estimate of the costs to repair your boat. The repair facility should provide a copy of the estimate to the surveyor as soon as possible and notify him or her immediately of any additional work or expenses that were not on the original estimate.

  • If your claim involves theft of equipment or personal property, prepare a detailed list of all the items stolen. A written estimate of the costs to replace items can suffice. Personal property is adjusted on an actual cash value or depreciated basis.

  • The marine surveyor should be in touch with you within two days. If not, contact your insurance company.

  • The marine surveyor will inspect your boat, take photos and review the estimate of repairs, and will then file a preliminary verbal report with the insurance company. That will be followed up by a formal written report. Funds will be released when the insurance company receives the written report, the police report and your statement of loss.

  • Most repair facilities will not order parts or begin repairs until you, the owner, authorize them to do so. Once the surveyor has inspected your boat and received all of the necessary information, he will give you the go ahead and you can then instruct the marina to proceed.

  • The insurance company's draft will normally be issued in both your name and the repair facility's. If your boat is repaired before your claim has been paid, you have the option to pay the repair facility yourself and then be reimbursed by the insurance company. Be sure to obtain a copy of the paid receipt. Of course, you are responsible for payment of the deductible.

- - M.J.S.

Standard Exclusions for the Hull Additional Exclusions That May Apply
  • Gradual deterioration
  • Wear and tear
  • Marring and denting
  • War and nuclear accidents
  • Willful misconduct
  • Ice and freezing
  • Blistering, osmosis
  • Insects, mold
  • Marine life and animals
  • Manufacturer's defects
  • Capture and seizure
  • While being service
  • While used for business
  • Theft unless visible signs of breaking and entering
  • Mysterious disappearance of gear and items on board, or the boat
  • Zebra muscle damage
  • Watersport liability
  • Leaking stuffing boxes
  • While racing

Michael J Smith is offline  
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