Yacht Insurance [Complete Guide]

News

March 11, 2020 11:55 am

For the yacht owner, insurance is a necessity. Superyachts present a unique risk, as the yacht itself is highly valuable, and additionally, the nature of operations onboard requires the crew to be protected. This class of risk is serviced by specialized underwriters, who use contract forms that have been developed explicitly for this market. Previous papers in this series have provided insight into the yacht purchase and charter processes, maritime compliance, and costs of ownership. This next article will outline some of the principle types of insurance for yachts as well as some other “things to think about” for owners considering their options for insurance.

Property Insurance (Hull & Machinery)

The property value risk is known in maritime insurance parlance as “Hull and Machinery”, often reduced simply to “hull”.

Hull Insurance – Hull insurance is provided to the value of the yacht and underwriters will look for proof of that value before providing the insurance. Other operational provisions will be expected by the underwriter to be in place as conditions of the policy. Such provisions may include items such as a tender-towing plan, severe weather (hurricane) plan, or a yacht management contract.

Yacht Insurance Premiums – In years past, there was a parametric relationship between premium and value, which made it easy to estimate premium based on the value and little other information. With the recent spate of heavy losses, however, insurance providers are now taking a much more actuarial view of the risk, reviewing operational and cruising plans prior to providing a premium quote.

Learn More About:

• Getting Underwriter Approval
• Determining Yacht Insurance Premiums
• Insuring Valuable Items Onboard
• Warranties + Conditions Precedent

Liability Insurance (Protection & Indemnity)

Liability insurance in marine terms is known as “Protection & Indemnity”, shortened to “P&I”.

P&I Insurance – P&I insurance in merchant maritime trade is often provided by “mutual” clubs which aggregate risk and provide extremely high (typically $500 million) limits for limited premium. Mutual members are advised that additional “calls” may be required if there is a heavy loss. For yacht owners, however, P&I club level of coverage (that $500 million) is available on non-mutual, fixed-premium terms and with very small deductibles.

Learn More About:

• Statutory Insurance Requirements
• P&I Club Benefits
• What Liability Insurance Covers

Crew Medical Insurance

Insurance policies are available to provide medical insurance to crew. Policies may be tailored to the requirements of internationally domiciled crew on yachts that travel internationally or may be specifically designed to meet the needs of a U.S. national crew which stay predominantly in the U.S., meeting the requirements of the Affordable Care Act.

Learn More About:

• Standards for Crew Employment
• Yacht Owner Obligations to the MLC

Additional Insurances for Yacht Owners

The hull, P&I and crew medical insurance elements discussed above comprise a basic level of cover which may satisfy most yacht owners. Additional cover extensions which are specific to certain risks are also available:

Charter Insurance – Owners that offer their yacht to the charter market will want to insure themselves against the contractual risks that arise from the use of the yacht by the charterer. Most underwriters will allow such use up to a limit, but owners are advised to check the terms of their policy.

Freight, Demurrage and Defense (FD&D) – This coverage responds to approved legal costs of the vessel owner arising out of contract disputes. This is for disputes that fall outside of P&I* (P&I responds to bodily injury and property damage caused by the legal liability of the vessel owner).

Kidnap & Ransom (K&R) – Widely available and known to persons of high net worth, K&R policies are available as extensions to yacht insurance.

Cyber-Extortion – The new frontier of yacht insurance, cyber-management operational policies and insurance policies are provided to protect owners from associated risks.

Learn More About:

• Legal Expenses Coverage
• Cyber-Extortion
• Employment Practices Insurance
• Yacht Repair + Maintenance Considerations
• Hot-Work

Insurance Claims

Yacht owners place insurance and pay premiums for a reason, to be made whole in the case of an incident that causes loss. Yacht owners should not be afraid of informing their insurer of a potential claim; the involvement of the insurer’s legal and survey team will very often result in no claim being needed, or at the least will forestall a long and difficult battle of technical repair and ongoing legal involvement.

In the case of any incident which may become an insurance claim, yacht owners and their representatives will be well-advised to ensure that the insurance is informed, that they are familiar with any loss adjusting surveyor appointed by their insurance, and that, if necessary, they also appoint an independent adjuster who will work alongside the insurance-appointed surveyor to represent the owner’s interests.