Have you read the fine print in your insurance policy recently? Not all insurance covers are the same and once the moment of truth comes when you make a claim you may be in for a shock.
The idea of insurance causes funny reactions in some people. It’s certainly true that securing the value of a possession against loss or damage has intricate ramifications which can trap the unwary.
But while it’s easy to blame the insurance companies for any rude surprises we get when making claims, the responsibility in the first place lies with ourselves when seeking insurance to know exactly what we’re getting into. After all, nothing is hidden. Insurance companies are required by law to put all rights and obligations in print before any contract is signed. You just need to be thorough before committing yourself.
What follows is no substitute for reading the fine print, but does lay down some ground rules for insuring your boat and accessories.
Know What You Want
What exactly do you want to insure? This may seem an obvious question, but it requires taking into account future plans and possibilities. For example, do you anticipate major modifications, e.g. superstructure alterations or hull lengthening? How well will the insurance policy cope? Or if you plan on buying expensive electronic gear, what is the policy’s value limit on unspecified equipment?
Also be aware of third party liability. It should be covered automatically, but make sure of this.
Agreed Value or Market Value?
How do you assess the value of your boat and accessories? Basically, there are two kinds of insurance contract, which have different means of value assessment. In an Agreed Value type of contract the craft is insured for a sum equivalent to its current value, typically the price paid if just purchased. In some cases – particularly if the sum insured exceeds the price paid – the insurer may request a professional valuation from a marine dealer, surveyor or broker. An easier way to look at it, is that in the event of a total loss, the payout to the policyholder is referenced from the sum insured at the time of the policy inception, (or last renewal).
A Market Value type of contract, on the other hand, doesn’t pay as close attention to the price paid and additional gear and fittings that are decided by the owner. In the event of a total loss, a Market Value policy will see the payout to the policyholder reference the value of the boat at the time and location of the loss. Generally an insurer will arrange one or more valuations to establish this and an owner can also arrange his/her one(s) too.
Fortunately, not all losses are total losses. Mostly, your contact with your insurer will be due to a wee “ding”, as stolen outboard or maybe a break in.
There is a reef to watch out for when sailing insurance waters. It’s called depreciation. Depreciation may apply to a partial loss depending on the age of the vessel, current condition and specific cover in the insurers wording. This is a stealthy thing that may only make its presence known when it comes time to make a claim. Policies endeavour to operate by “placing you in the same situation you were in before your loss, taking into account depreciation.” You should pay particular attention to that ‘taking into account depreciation’ rider. What it means is that if you lose a three-year-old dinghy, you’ll either be given a three-year-old dinghy to replace it, or the cash equivalent of a three-year-old dinghy. Thus the Indemnity-type policy reduces the value of the boat through depreciation over a period of time.
Policies generally depreciate those items that age rapidly; traditionally the masts, spars, sails, rigging, protective covers and outboard motors. You might in addition want to confirm your policy’s attitude towards electronics, which depreciate rapidly, not through wear but obsolescence. (After all, would you buy a five-year-old computer?) In the event of a total loss, as opposed to partial damage, even this limited depreciation may not be applied by the insurer in the payout.
It is generally accepted within the insurance industry that an Agreed Value policy contract is superior to a Market Value contract. However, it is important to be aware that each insurance company has a different view of the matter, and the above should be read only as a general guide. The distinction between the two kinds of policies is “not always clear.” There are numerous variables. For instance, policies will often allow a period of grace – typically two or three years – before depreciation on the boat or accessories takes effect. Also, some insurance companies offer Agreed Value contracts only on moored (as opposed to trailer borne) private craft.
In particular, be aware that although having your boat sunk may be the ultimate nightmare, it is far more likely that it will suffer partial damage. You may be covered if the boat is lost, but what happens if another boat scrapes the hull while it’s at its mooring? How well will the policy cope with burglary?
The core point of all this is, don’t be too obsessed by getting the cheapest premiums. Nothing comes without a price. If you gain on the swings you could lose more on the roundabouts. Cheap rates may cost you at claims time.
Club Marine’s policy wording has three sections; Accidental loss or damage to your boat, Liability to other people and Injury to the named insured.
Not all insurance companies provide the same type of cover for example liability limits may differ and some may not provide a personal injury cover.
It is important the sum insured reflects the boats current market value so that when a client enters into an insurance contract the premium reflects the risk.
It is worth noting that there are some good buys out there in the used market, for example a boat listed for sale at $100k might sell for $80k. This is interesting because in this instance a client may ask for a quote based on $100k as opposed to the purchase price which appears to be the true and present day market value. The client will say that they got a good deal and the boat is worth $100k????
Personal effects, equipment and accessories cover will differ with varying, specific or no limits for this type of cover. You need to remember that its a hull policy not a contents policy and some items would be covered under a contents policy.
You need to check out the wording in your policy to see that you are as covered as you might think. The moment of truth is when the policy wording is tested based on the loss. It is generally considered that a policy wording will respond in such a way as to put the insured in the position they were in prior to the loss assuming the loss is covered in the policy wording.
What operating area do you want covered by the policy? Different policies may offer big variations. Is your boat covered while being transported overland, or if held in storage or at a workshop? A policy might not cover the west coast, for instance, or apply outside of territorial waters. If you’re planning a voyage to another country, you need to make sure that your insurer will offer an extension to your New Zealand waters policy for off-shore voyages. Not every insurer will. You will in any case have to apply for coverage well before the planned departure date. The insurer will want confirmation that your boat and crew are suitable for trans-oceanic voyaging.
If you plan to sail out in the south-west Pacific during the December-April cyclone season, you should be particularly clear about your insurer’s attitude. It’s quite likely they won’t touch you with a barge pole!
Easing the Risk Factors
It pays to look at things from the standpoint of the insurance companies. It’s a chancy business for them as well. If you can ease the stress your insurance company is exposed to, your insurance company may very well ease the stress on your wallet. There are areas in which you can reassure your insurance company of your low-risk status and consequently put yourself in the way of a discount.
“Insurers are like all businesses and like to say ‘Yes’” says Aaron Mortimer from Mariner Marine Insurance Ltd. “So the more details you can give us about your own boating and experience afloat, the better. So, if you have been at sea for 30 years, tell us. Don’t just write “lots” on the proposal. If you have boating qualifications, tell us which ones. Sing your praises!”
Crew capability is a major headache for all insurance companies. It’s hard to test owners’ competence and as something like three-quarters of boat accidents are caused by human error, insurance companies are painfully aware that an award-winning hull packed with sophisticated electronics and powerful motors can all be negated by an idiot at the helm.
Little wonder then that the proffering of a recognised boating competence certificate as run by most Coast Guards will put you in a strong bargaining position with any insurance company. Experience and a clean insurance history are always useful assets to have when approaching insurance companies.
The physical location of your boat is an important factor in assessing premiums. For reasons of security, keeping your boat in a marina will likely give the cheapest premiums. Pile moorings will incur a premium loading, but this may be small if the mooring is landlocked. Swing moorings, of course, having minimal security attract the maximum loadings.
Also, in an increasingly competitive environment, some insurance companies are offering more in the way of policy add-ons, such as Club Marine’s just-launched Club Marine Assist program. Basically a phone concierge service in which Club Marine members can access both on-water and on-road assistance for everything from directions to the nearest marina to organising a tow truck for a breakdown, Club Marine Assist is a completely free additional feature to all policyholders.
“We’ve trialled it successfully in Australia for three years and we’re proud to now offer it to all our New Zealand members,” said Club Marine NZ Manager, Emily Malthus.
Finally, and not least, the quality of the boat plays a major part in deciding premiums. Was it built to survey? Does it comply with such regulations as the Safe Ship Management Programme or a Safe Operational Plan? Petrol engines will cost more to cover than diesel, as will stern drive as opposed to main shaft. Ferro-cement and multi-hulled boats may not be insurable, or will incur loadings if they are.
The Maritime Safety Authority is becoming stricter. There is a trend towards stricter enforcement of existing regulations, and the promulgation of new legislation to enhance safety. Most insurance companies are more than willing to reward evidence of competency and a sense of responsibility on the part of a boat owner seeking insurance.
It’s easier to get insured now than it’s ever been. The internationalising of the insurance market means that premiums are perhaps half what they were twenty years ago. Getting insured involves common-sense preparation. Know exactly what you want; take steps to make yourself as low-risk as possible; shop around for the policy that fits exactly with what you want – and take nothing for granted.