Bryan Davies, Founder of CompareYachtInsurance.com, has taken some time out to answer the basic questions surrounding yacht insurance. Here’s his two-cents on what some industry jargon means, and later on how best to understand it and use it to your advantage of reducing your yacht insurance premiums.
What is yacht insurance?
• Your fully comprehensive yacht insurance policy covers you for any losses that you sustain to your vessel (dubbed by insurers as Hull and Machinery coverage) and any legal liabilities that you may have to a third party, that have arisen out of your ownership of the vessel (dubbed liability or P&I Insurance). In certain cases, you may decide that you don’t need Hull and Machinery coverage, and may opt for liability only coverage.
How much does yacht insurance cost?
• The cost of yacht insurance depends firstly on the value that you want to insure. Insurers often give you a percentage of the hull sum insured to start off with. You will then have additions and deductions based on where you are using your yacht, for what purpose (racing, charter, deep sea fishing, etc.), what your level of experience is an amongst many other factors whether or not you’ve had any claims.
How do I qualify for discounts on my yacht insurance premium?
• Discounts usually come in the form of loyalty benefits or improving the ‘risk’. If you stay with an insurer for multiple years, they should look out for you and entice you with a loyalty discount that is fair for them too. If you are in your first year of insurance or looking to further decrease your premium, then you should ask insurers to reduce your coverage, or present yourself as an improved risk. Let them know about any and all extra qualifications that you have attained, any improvements to your yacht, and anything else that will help insurers regard you and your yacht as a safer risk.
What are all risk policies?
• An all risk policy covers your yacht for all types of losses that you may have, except for those that are excluded in the exclusions section. If there is a new type of loss that insurers aren’t aware of, then you are automatically given the benefit of the doubt with the claim being covered.
What is a named perils policy?
• This type of policy is different to an all risk clauses policy. Here you are only covered if one of the listed events has occurred. These will be defined in the wording.
What is agreed fixed value?
• This is the value that you insure your yacht for. If you have a total loss or constructive total loss, then you will be paid out this amount, regardless of what the market value of your yacht was.
I have sold my yacht, what should I do with my policy?
• The moment that you hand over the keys to your yacht in a sale, you no longer have insurable interest. Therefore no insurance policy would be enforceable, as even if the yacht were to catch on fire the next moment, this would be the responsibility of the new owner. You should contact your insurance company as soon as you sell the vessel, and ask them to cancel the policy. Depending on whether or not your in your first few months or first year of your insurance policy, will dictate what sort of insurance premium refund you’ll get – as long as you’ve not made a claim on the policy.
How long is a policy period?
• Unless specifically agreed otherwise, 99% of yacht insurance policies cover a 12 month period. If you take out insurance today, then it will expire at the same time and day next year.
Should I notify my insurer if I change address?
• Yes, you must notify your insurer as soon as possible after changing address. This is to ensure that any written correspondence is sent to the correct address and you do not miss important notices.
I’m going to take my yacht out of the water for a prolonged period, should I notify my insurer?
• You almost certainly should notify your insurer as the risk will change in their view. You may be entitled to what are called lay-up credits, whereby you are entitled to a reduction in premium to reflect the reduction in risk.
Should I unstep my Yacht’s mast when ashore?
• This is often not dictated by insurers, unless you are in a hurricane prone area abiding by an agreed hurricane plan. However as a prudent owner, if you have the time and opportunity, you may want to consider unstopping the mast in order to reduce the windage and potential damage. This can also give you an ideal opportunity to fully clean and service the mast, and have a rig check over everything that has been stressed when in normal use. It is not unnormal to identify a cracked turnbuckle or touch up of paint required to stop surface corrosion.
I need to go outside of my cruising area, what should I do?
• In the first instance, you should contact your insurer to see if they are able to amend your coverage to going further afield. In some instances, the insurer may recommend a different cruising area based on your needs and requirements that actually reduces your premium, so it’s always worth having a good report and conversation with your insurer. If it is after hours and you cannot contact your insurer, then you should read the terms and condition of your policy. Some policies allow you to leave your cruising area for a period of 12, 24, or 72 hours prior to informing your insurer or in case of an emergency (such as avoiding bad weather).
What are ‘betterment’ and ‘new for old deductions’?
• These terms are almost always used interchangeably by insurers. Even if a policy is ‘Agreed Fixed Value’, insurers may write into their policy that in the event of a claim, they are entitled to deduct a certain percentage of the costs to reflect you not being put in a better position than prior to your claim. A key example of this are your electronics on board. If you had 10 year old electronics, and were struck by lightning, insurers would only be able to source you brand new electronics. You would then have electronics 10 years newer than you had before, so the insurer may deduct a percentage to account for this. In order to avoid this, ask a prospective insurer about buying out of the New for Old deductions, or go straight out to look for a ‘New for Old’ policy. Your requirements will vary depending on whether your yacht is brand new or 10 years old +.
Should I reduce my hull sum insured at every year of renewal?
• This really depends on whether or not you want to try and reduce your insurance premiums every year. You should however also consider the cost of you having to buy a replacement vessel of the same or similar specification if you were to have a total loss. For example, if you buy a brand new yacht, and after 3 years the yacht is still in immaculate above market condition, then you would need your hull sum insured to remain at the brand new level in order to replace your vessel in the event of a total loss.
How often should I have my rigging checked?
• We strongly recommend checking your rigging at least once a season, depending on how often you use your yacht. This is something that you can do yourself by being hoisted up in a harness or bosuns chair. You’ll be able to get some informal guidance form a rigger to help you identify what to look out for, however as a rule of thumb, cast your eyes over everything and look for any damages, cracks or anything else that shows signs of wear. You should ask a rigging specialist to inspect your rigging every 4 years at least, and consider that your standing rigging (shrouds, backstay, forestay), may require replacement every 8-10 years, depending on the manufacturers specifications and advice.