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Marine Insurance for Boat Owners
Most marine policies are made up of many underlying policies. When they are looked at in combination you can see how your specific coverage will respond to a particular claim. It is important that you have a basic understanding of your coverage so you can know what to expect from your underwriter and broker.
The following is to be considered a brief overview, not legal definition. If you have specific
questions, consult either an attorney or your insurance broker.
The Hull Policy is the first and most common policy that one would have. This is usually written
with an Agreed Value, which is arrived at by determining the Market Value of risk. It may cover,
depending on the specific form and coverage, the hull itself, the machinery and the electronics
and other associated risks. There is in most cases a deductible, which applies depending on the
coverage and loss.
Protection and Indemnity
(P&I).
This can cover a wide
variety of exposures again depending on the form and the coverage. In most cases it is important
to cover the Crew with Protection & Indemnity insurance in the event of any crew injuries. It is
also important to make sure that there is enough coverage to adequately cover ALL the exposure.
It is very important that you understand how your Protection & Indemnity (P&I) coverage works.
The coverage is written on a " per occurrence" which means the most the underwriter will pay in
the event of a covered P&I loss is the policy limit. For example, if you have a P&I policy covering
4 crew for $1,000,000 the most that the underwriter will pay is $1,000,000 whether 1 or 4 men are
making a claim against you. If you are found liable for more, you have what is know as an "underinsured"
situation where you are responsible for the amount above what your policy responded to.
Because of this, as your crew complement goes up, so should your P&I limit.
Observers
P&I becomes an
issue when you take "observers" on board your boat. Under Maritime Law, even if they are insured
on their own policy, they could make a claim against you. Because of this you should advise your
broker about what you are doing so that adequate insurance is provided to cover your exposure.
There will likely be a charge for the added coverage. Some of the factors that go into
determining how much that will be are:
- Amount of insurance required.
- How many observers will be onboard.
- How long will they be onboard (how many days the "survey" is being conducted for and
how many hours per day you will be out).
- Distance from shore while conducting the "survey."
- Time of year
- Type of work that is being done.
- Claim history of insured (Boat owner).
Hence, you are likely to pay more for a "Survey" that is to take place from January
through March, within 100 miles offshore with 2-3 observers onboard for 28 days working 18-20
hours per day then you would for a " Survey" that would take place from June thru August,
within 25 miles offshore with 2-3 observers for 28 days working 8 hour days.
Something else that is commonly overlooked is lifesaving equipment. If you have a crew of 4
and want to take 3 observers, a 6-man liferaft will not fit the bill. You must supply enough
required equipment to go around for everyone that is on your boat.
When you talk to your Broker and decide on the type/amount of coverage you are adding, it will
be done as an "Endorsement" to your policy. You should have that to review ASAP; most commonly it will be faxed.
War Risk
This picks up coverage
that is commonly left out of a Hull Policy like vandalism and malicious mischief and theft.
Single Interest Mortgage Insurance,
which is sometimes called
Breach of Warranty Insurance. This coverage would, under certain circumstances, cover your mortgage (if you have one).
Pollution Insurance
provides coverage for
some types of pollution exposure. Recently this area has come under greater scrutiny and Pollution
insurance is becoming more of a necessity.
Builders Risk Insurance
covers you and your vessel
while it is under construction. It is especially important to have a policy in your name, not the builder's. This way, in the event of a loss, any payment would be made to you, not someone else. This situation has come to light when a boatyard had a fire, and the owner of the yard had only enough coverage to cover a fraction of the losses because of the amount of boats that were damaged by the fire and the limits of his coverage. He had to ask the owners to go and contact their insurance company for coverage under their policies. If you had your boat there and didn't have your own policy in effect, you may have had to take the owner to court in the hopes of recovering your losses. Could you wait that long?
Port Risk Insurance
It is possible to get
a policy to cover your vessel while it is not in use. This is called a Port Risk policy. Depending
on the form and the clauses, this might cover your vessel for hull damage and afford coverage for
P&I if there is a claim while the vessel is not operational. Depending on the specific policy you
have, it may or may not allow work to be done on the vessel, or may allow for the boat to be moved
around the harbor within a specified distance, or may insist that the vessel remains tied to the
dock. As with all insurance it is crucial that you understand the coverage you have. If you have
any questions, call your broker.
In summary, you should be able to look over your Marine policy and have a fairly good idea of
what you are covered for and how much coverage you have. It is very important that you review your
policy at least on each renewal so that you are aware of the limits and conditions of your coverage.
It is a contract between you and the underwriter and if you think there should be any changes made
to it they would have to be made before there is a claim. If you think there are changes or corrections
that need to be made, you must inform your broker immediately so they can be addressed before a problem arises.
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