A-Z Guide to Luxury Yacht Insurance
Although in many states, the law doesn’t require owners to carry yacht insurance, most yachts are insured because of the astronomical cost of repairs. Yacht insurance is also typically required by banks, marinas, yacht clubs and the federal government to cover crew-related liabilities (unless the vessel is owner-operated).
However, because each yacht is highly unique in size, systems, crewing and operational geography, buying yacht insurance is much more complex than insuring a car, for example. Yacht insurance policies are tailored to individual vessel needs, and owners can benefit from dissecting the elements of a policy so they know what questions to ask and what exclusions and inclusions to pay attention to.
YACHT INSURANCE 101
All yacht insurance policies offer two key coverages – physical damage and liability. Physical damage coverage includes repairs of the hull, machinery and equipment, but exceptions apply and they vary from one insurer to another. Ask your broker in detail which physical elements and systems are covered and which are not.
Liability coverage protects you from claims of damage to persons or property. The scope of these claims can be quite extensive and include damage to other vessels, port equipment and facilities, as well as injury or death. Your coverage must include environmental damage remediation, such as cleaning up oil contamination or removing a wrecked vessel from the water, and it must cover incidents involving onshore marine workers and crew members, as per federal law.
Yacht insurance can include many types of protection for policyholders, but insurers vary in what risks they will and will not cover. That’s why it’s so important to review exclusions in detail. You don’t want to discover something isn’t covered after the fact.
WATER CRAFTS AND ‘TOYS’
Personal water crafts and ‘toys’ – from jet skis and seabobs to submersibles – are expensive assets that should also be insured. Review your vessel policy with your broker to see if yacht insurance covers these water toys and equipment. If this is not the case, you may need to get a separate policy for each of these items.
INSURANCE COVERAGE DURING LAND STORAGE OR TRANSPORTATION
If you have to transport your yacht by land or on a yacht delivery ship, you will need a policy that extends to those cases. Under the U.S. Carriage of Goods at Sea Act, the steamship line liability for damages to your yacht can be as low as $500, so you may need to supplement that with further coverage. Similarly, if you keep your yacht on land during the off-season, you will need to cover fire and other natural perils, as well as theft and vandalism.
UNINSURED BOATER COVERAGE
Although most yacht owners carry comprehensive insurance, some owners still do not. An uninsured boater policy protects you in the event that you or someone on board your yacht sustains injuries during an incident with a vessel that has no insurance.
EMERGENCY TOWING AND WRECK REMOVAL
Whenever you need fuel delivered at sea or towed to a place of repair, you want to have these costs covered by yacht insurance. Review your policy to check if there is a limit on these costs or a limited number of towing services per year. Similarly, if the yacht is wrecked as a result of a major accident or disaster and becomes an environmental or navigational hazard, you want coverage that will pay for salvage and disposal.
WHAT IS TYPICALLY EXCLUDED FROM YACHT INSURANCE?
Although many yacht insurance policies are quite comprehensive, there are always certain types of damage or liability either not reimbursed or categorized as “extras”. Here are some issues typically excluded from normal wear and tear coverage:
Insects, Mold and Marine Life Encounters
Mold and pests can cause costly damage to the hull, decks, interior or equipment, but they are not covered by insurance. For example, if a shark sinks its teeth into the stern (unlikely) or bugs eat through soft goods during winter storage (more likely), you’ll need special coverage to pay for those repairs.
Negligence, Boating Under Influence and Racing
Like other insurance policies, yacht insurance excludes losses through negligence or willful misconduct. If your yacht is involved in an incident due to someone operating it under the influence, your insurer may reject the claim outright or only the liability portion. Racing may be another excluded event and require its own dedicated policy.
Most yacht insurance plans extend to specific cruising areas and deactivate when a yacht sails beyond these navigational limits. Yacht owners must ensure their navigation area is covered by insurance. In addition, many policies require yachts to be stored above certain latitudes during hurricane season. Owners should be aware of these requirements or have their insurance plans extended to where the yacht is moored.
AGREED VALUE VS. ACTUAL CASH VALUE
In addition to the scope of coverage, most owners are concerned with the amount of insurance compensation, insurance premiums and their impacting factors. How an insurer values your claim is a big factor in determining both compensation and premiums.
If you elect to carry an ‘agreed-value’ policy, you get the exact amount shown on the policy when it is signed, minus your deductible. This option comes with higher premiums, but it’s preferred by many owners. Your other option is an ‘actual cash value’ (ACV) policy, where the insurer factors depreciation into the claim value, resulting in lower annual premiums.
BEST OPTIONS TO BUY YACHT INSURANCE
While smaller boats can be insured by your home insurance, owning a mega yacht always calls for a tailored insurance plan. A comprehensive yacht insurance policy should cater to specific risks associated with navigating a larger vessel on high seas, including the liability to your crew or other boaters, damage to water toys or other property aboard or sailing in certain geographic regions.
Many owners turn to yacht brokers or professional maritime insurance providers, like Oversea Insurance Agency, who leverage a worldwide network to offer 24/7 assistance all over the globe. By having a comprehensive yacht insurance plan from industry experts, yacht owners can rest assured that they will receive the most comprehensive insurance coverage and full support from initial consultation to insurance claim resolution.