By now, many readers of this article may have had the opportunity to experience Constellation Yacht surveyors unparalleled expertise in Yacht condition surveys, pre-purchase evolutions, operational and engine trial surveys, and valuations.
However, there are other facets of consultancy that
we offer to our clients, specifically related to post
purchase, the most important aspect we consider is insurance
of your asset.
Contrary to popular belief, purchasing insurance, and underwriting Yachts is much more complex that it seems, given the design evolution of the asset itself, coupled with numerous unusual clauses appearing within the standard IYC Yacht policy terms, often creating ambiguity between the proposed policy and the yacht being covered, including its intended use.
To that end, Constellation Yacht surveyors, over the years, have extended their profile and expertise to assist both the insurer, and the insured in offering consultancy services for this very important aspect, through our in-house team of Chartered engineers, valuators, and lead consultants.
Up until the year 2010, Yacht insurance was seen to be a bespoke activity, often remained in the hands of niche companies. Thereafter, there was a proliferation of numerous Marine Insurance companies offering this service, which previously only provided insurance to cargo vessels. This breakthrough was generally welcomed as it created healthy competition within the market, but also lead to instances in disconnect between the policy and the asset insured.
The purpose of this article is to provide a brief
aid to memory on the aspects of Yacht insurance that
may be considered prudent to evaluate prior to entering
a policy contract.
It is well known that the Institute Yacht Clauses are widely used to cover policy wordings, however Yacht’s vary enormously in size, shape and design, its fitments and machinery, and therefore a refinement of the standard clauses are generally mandated.
Therefore, for the insured there are several factors to be considered beyond the standard policy wordings offered by the insurer –
For the boat owner, an “Agreed Value Policy” may be beneficial to evaluate; even though it costs more upfront, in the unlikely event of a total loss, the owner of the boat and the policy holder will be paid that amount. Another advantage is the lack of deduction for depreciation and the concept of “replace old items for new (with conditions)” in the event of a partial loss.
A further aspect to be considered by Yacht owners is what the insurance policy covers. In principle an “All risk Policy” will offer the best protection, having said that it is important to be aware that it does not cover all types of loss, with customary exclusions which include wear and tear, manufacturing, and design defects, and sometimes, sails and outboard propulsion units.
Boat owners may also wish to consider adding extra
coverage, including but not limited to third party damage
to Marina and docks, personnel effects, towage and assistance.
This will generally depend on how the owner wishes to
use his / her Yacht, and the associated risk involved
at a particular geographical region the boat is sailed
Another facet worthy of consideration by yacht owners shopping for insurance covers is Warranties. Please be aware that should owners “breach” warranties and experience a loss, you will end up with no payments from the policy insurer.
A final consideration by Yacht owners should be on the Insurance cost factors. Insurers make use of many factors in setting a cost for the offered policy, and experience shows they vary among insurance companies. A few common factors are:
Cursing area, which generally is the geographical area where the owner intends to use his Yacht.
How well the owner of the boat is trained, and it is advantageous for the owner to be formally certified.
The limits of liability and the deductible – In general, the higher the deductible, the lower is the insurance premium.
From the point of view of the insurer, it is noteworthy to consider and evaluate some of the unusual clauses found in the standard Yacht policy, which are generally missing from ordinary cargo ship hull policies.
Navigating and Charter Hire warranties.
Unlike cargo vessel which operate worldwide (but always within IWL) it is common for Yachts to be restricted for navigation within specific geographic areas, and where they will operate within the policy period.
It is also common that the Yacht be additionally covered for voyages between two specific geographic areas of operations, such as for example, coverage for operation in Dubai and Muscat areas does not automatically mean that the yacht is covered for the voyage from Dubai to muscat through the Arabian Gulf and Sea of Oman.
Speed Warranty and speedboat Clause (Clause
5 & 19)
It is important for the insurer to decipher the distinctions and parallels between the two clauses.
In principle, this clause provides for increased risks associated with Yachts capable of being operated at higher speeds and those generally associated with racing, and for accidents that may occur during racing.
Simply put, the assured must be able to demonstrate and provide a warranty that his yacht is not capable of travelling beyond 17 knots, accordingly only one of the (2) clauses will apply to the policy.
Third Party liability
For cargo vessels, this generally falls under the domain of P&I risk cover. However, for Yacht insurance, the insurance company now becomes liable for both hull and machinery as well as for P&I risks.
Another note worthy aspect of this clause is that it extends cover to circumstances where someone other than the insured is operating the Yacht, as this is commonly the case on larger yachts.
It is therefore worthy of consideration if insurance companies are willing to accept this step when writing the policy.
To end, it is apparent that insurance covers brought by Yacht owners and written by insurers require careful evaluation of the circumstances and the asset that is insured.
It is thus prudent that at the least, first time Yacht owners strongly consider seeking professional consultancy in this area, and constellation yacht surveyors are available at hand much after the evaluation of your Yacht has been completed, so that not only are you in possession of an asset that is up to your expectations, you will also remain protected during its years of use.
It’s a good practice to carry out the moisture content evaluation at regular intervals as a precautionary measure for hull check-ups to maintain life. We at constellation marine have a decade and more of experience in Percussion Testing and Moisture Content Evaluation by a team of Master Mariners and Engineers. We use certified moisture meters and have completed over 22,000 nominations between our team of 15 full time staff surveyors.
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By: Capt. Vispy Dadimaster