Ask an Expert...Marine Insurance Q&A
by Deane Tank of Tank/Matsock Insurance & Financial
Services, deane@dhtankinsurance.com
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| Make sure you are covered for this situation! |
For more information please check Deane’s website at www.dhtankinsurance.com. For more
than 30 years the Tank/Matsock agency has served the insurance and investment
needs of its many customers nationwide. The Tank/Matsock agency is an
independent insurance agency which offers a carefully selected group of
financially sound, reputable insurance companies from which to choose.
1) Why does the
cost of insurance go up as the boat ages?
The marine insurance industry claim activity clearly tracks
a positive correlation between a boat’s age and its claim activity. So, as a
boat ages its claim activity goes up. There are actually several reasons for
this correlation. Generally, the increase comes from machinery claims and
submersion claims. Both types of claim increases are likely due to the parts of
vessels aging such as thru hull fittings, hose clamps, standing rigging and
running rigging fittings, and a host of other machinery related parts that fail
as a result of age.
The second reason older boats cost more to insure is that
there also is a negative correlation between a boat’s age and its market
value. This becomes a problem when a
loss results because it costs the same or more to repair the part (or hull) on
an old boat as it does on a new vessel. As an example, an older boat may have a
style of cleat or toerail that is no longer available, so both sides would need
to be replaced to make the boat match port to starboard. In addition, sometimes
older boats have a system that is no longer made. For example, older rigging
tang styles (attachment points for shrouds) are no longer manufactured, so both
sides of the rigging would need to be replaced were one damaged.
Thirdly, since the value of the boat is decreasing as it
ages and it costs the same or higher to repair, the insurance company must now
charge a higher rate (per $100 of insured value) for older boats than for new
boats to compensate for the same partial loss claim costs.
Lastly, also note that in the cases where the deductible is
a percentage of hull value that the deductible on a new boat is going to be
higher and the deductible on an aging boat will be shrinking as the value
declines. This situation also adds to the rising claim costs on older boats.
2) Do you have to disclose live aboard
status, if applicable?
General answer is that most boat/yacht insurance
applications do ask the question. They do so because the insurance companies are concerned with
the increased opportunity for claim activity due to the exposure of increased
or constant use by the live aboard’s activities such as cooking, increased
electrical usage, space heaters, electronics use, etc.
If the applicant states they do not live aboard the vessel
when in fact they do live aboard. This would be grounds for misrepresentation
and could result in the declination of coverage or claim.
3) What
are the minimum insurance requirements for most marinas?
Generally speaking on a case by case basis it would be
$500,000 dollars. Some might be as high as $1,000,000. It is also safe to say
that most marinas would also be looking to be named as an additional insured as
well.
Ed. Note: For winter storage Crowley’s
required $1,000,000 liability and named as additional insured.
4) How does
salvage coverage work? Is it part of my regular policy?
Ed. Note: We asked Deane to answer this question after we
had a few customers left having to cover salvage costs out of their hull
policies. For your protection, please make sure you have the proper coverage
for this type of loss.
Most yacht policies have a section identified as “Protection
and Recovery Expense / Salvage Coverage”.
According to Maritime “salvage” law the award for a
successful maritime salvage can be up to the full value of the vessel and its
contents. Disregard contents for our application as salvage law was originally
designed to provide financial incentive to salvors to (go out and risk their
own life and limb and vessel) to rescue a vessel and her cargo and her
passengers that were in imminent danger. (These laws are hundreds of years old)
Writers of this law figured if it had it not been for the
successful efforts of the salvor the vessel and her contents would be lost…… so
the value of the successfully salvaged vessel should be up to the (full value)
of the rescued vessel and contents. And this kind of makes sense. That fact
that the salvage may have also included the saving of human life just seemed to
be a perk to those whose lives would be saved. How about that!
Fast forward to 2012 and the same salvage laws apply. Most “quality” yacht policies provide salvage coverage up to
the full value of the insured hull and this coverage is in addition to the Hull
coverage.
For example; you could have a vessel that collides with a
submerged object and rips out the struts and shafts. Let us say, for example,
she is taking on water and she satisfies one of the triggers for valid salvage
claim; that being the vessel is now in imminent danger. (And if she is not
rescued she will be lost).
Now for purposes of this example SeaTow speeds out to the foundering
vessel and places big high volume water pumps on the sinking vessel…they stick
an air bag in the boat and they employ a diver to make a patch repair over the
whole bottom area where the strut and shaft were torn out and left a gapping
hole.. Sea Tow then tows the now stabilized vessel back to shore where vessel
is hauled out of water for permanent repairs.
For this example let us say the boat was a 30 foot cruiser
insured with a $200,000 hull value. The cost to repair the damage to the vessel
as a result of the collision with the submerged object is $150,000. We note the
boat is not a total loss. We note Sea Tow submits a salvage claim for $75,000
for their Salvage efforts.
Under the hull coverage section the yacht insurance carrier
would respond to the $150,000 in repairs to the vessel from the collision.
Under the yacht policy Hull
coverage section/ Protection and Recovery Expense/Salvage coverage subsection/
the insurance carrier would respond to the valid salvage claim for the $75,000
expense to Sea Tow. (Technically the policy could have paid up to the full
insured value of the hull in addition to cost of repairing the hull) That is
the way this coverage works.
In summary the insurance company pays out $150,000 plus the
$75,000 salvage claim on a vessel insured for $200,000. Sounds like it would
have cost the insurance company less to just let the boat sink and pay out
$200,000 (not $225,000) but that’s the way it works.
I should also note that “Wreck Removal Coverage” in an
amount up to the full limit of liability coverage on the policy ….is also
provided for in most quality Yacht Policies. (This is completely separate from
Salvage coverage…and responds to the cost of raising a boat off the bottom when
you are required to do so by Federal authorities). This is found in the
Protection and Indemnity section of the yacht Policy. (This is a pretty
critical coverage when your 110 foot houseboat burns and sinks at the dock)
It is important to review your yacht insurance policy for
Salvage coverage as there could be significant differences in what different
yacht insurance carriers offer in their policies. To review your policy or for any further inquires please contact me at deane@dhtankinsurance.com.
