Coverage for Yachts

Learn more about Yacht Insurance policies, coverage options, and how you can best protect your investment.

What is Yacht Insurance?

Yacht Insurance policies are designed to cover larger vessels - usually over 26 ft. - and typically provide comprehensive coverage.

All Yacht Insurance policies contain two basic coverages: Hull Insurance and Protection and Indemnity (P&I) Insurance. However, Yacht Insurance policies often include supplementary protections that would otherwise be offered for an additional premium with a boat policy, such as coverage for pollution and personal property.

Yacht Insurance policies also present insureds the flexibility to personalize their coverage to accommodate their own specific needs, whether it be custom navigational limits, additional hurricane protections, or coverage for dinghies or tenders. More information on additional coverages can be found here.

Hull Insurance

Hull Insurance is the section of a yacht policy that covers physical damage to your vessel. This not only includes the hull and engine(s), but also any personal property or other equipment on board necessary to operate the vessel.¹

Hull Insurance is designed to cover direct physical damage or the complete destruction of your vessel from perils such as collision, sinking/capsizing, weather, fire, theft, vandalism, and piracy. This section is generally tied to an Agreed Value determined by you and your insurer when the policy is issued. This value establishes the amount to be paid - without deductible - in the event of a total loss.

Protection and Indemnity (P&I) Insurance

Protection and Indemnity (P&I) Insurance is the most comprehensive section of a yacht insurance policy, covering nearly all maritime legal liabilities to third parties related to the operation of a vessel.

Protection focuses on protecting against the liability of the boat owner, whereas Indemnity focuses on liabilities such as bodily injury or property damage associated with the use of the vessel. P&I insurance additionally provides coverage for any judgements against an insured as well as any defense expenses in an admiralty court.⁴

The Protection and Indemnity (P&I) section of a yacht insurance policy typically provides the following coverages for losses involving third parties:

Bodily Injury; Property Damage; Defense; Wreck Removal; Pollution; Longshore and Harbor Workers / Jones Act.

What Factors Influence Your Policy?

Insurance providers take a number of factors into consideration when determining whether or not to offer a policy. In doing so, they evaluate the risks associated with a vessel and the conditions that would be attached to a policy, if issued.

Factors an insurer may consider when making a decision include: Age of Vessel; Type of Vessel; Length; Value; Speed/Power; Condition; Location of Use; Home Port; and Ownership. Premiums can be reduced through several methods, such as decreasing policy limits or enrolling in a boater's safety course.

Loss Settlement:

Insurers settle losses using two methods of valuation: Agreed Value and Actual Cash Value (ACV).

Agreed Value is a method of valuation in which you and your insurer agree upon the value of your vessel when the policy is issued, whereas Actual Cash Value (ACV) is a way for insurers to determine the value of property that is being repaired or replaced following a loss. Actual Cash Value is calculated by subtracting the depreciation cost of your vessel from its original replacement cost, and includes a deductible.

In yacht insurance, most providers will settle total losses to the full Agreed Value, while partial losses are generally settled on an Actual Cash Value basis.

Bodily Injury & Medical Payments

Bodily Injury coverage is designed to protect an insured from injuries incurred by a third party where the insured is at fault. "Bodily injury" in this context may include death, injury, or illness of any guests, crew, or third parties. This coverage also typically extends to expenses such as medical bills, hospital stays, and rehabilitation for which the insured is legally liable.

Medical Payments provides similar coverage by offsetting the costs of medical bills, first aid, or hospitalization associated with the operating a vessel. However, the Medical Payments coverage of a yacht insurance policy applies without fault and does not require any legal action to be brought against the insured.

Property Damage

Coverage for Property Damage can be found in both the Hull Insurance and Protection and Indemnity (P&I) Insurance sections of a yacht insurance policy.

The Hull Insurance section of a yacht policy provides coverage for property damage incurred by the insured to their own vessel, including any personal items or equipment required to operate the vessel. Losses are settled according to their severity; Total losses are settled in full up to the Agreed Value determined when the policy was created, while partial losses are usually settled on an Actual Cash Value (ACV) basis.

In the P&I Insurance section of a yacht policy, coverage for property damage is designed to cover expenses for physical damage to a third party's boat, dock, or other property in which the insured is legally liable. Payment for these losses is only provided up to the established policy limits.

Defense

Coverage for legal defense may be found within the Protection and Indemnity (P&I) section of a yacht insurance policy.

This coverage protects insureds from any claims or judgements brought up by a third-party against them, as well as provides reimbursement to the insured for any defense costs incurred in an admiralty court. "Defense costs" may refer to attorney and expert witness fees, court costs, transcription costs, and/or any other related costs and expenses.⁶

Wreck Removal

Coverage for wreck removal is designed to offset costs associated with the removal or disposal of a wreck following a total loss, and may be found within both the Hull Insurance and P&I Insurance sections of a yacht insurance policy.

This coverage may be applied both to losses involving the insured's own vessel or the vessel of a third party for which the insured is legally liable. Coverage for wreck removal is especially important in situations where the wreck is deemed to be a hazard to navigation or is at risk of polluting the area with oil or contaminates.⁷

Pollution

Pollution coverage may be found within the Protection and Indemnity (P&I) section of a yacht insurance policy.

This coverage is designed to offset the costs of containment or clean-up in situations where the insured is legally liable. Carrying this coverage is especially important as vessel owners may be found personally liable under the Oil Pollution Act of 1990 up to the set statutory limit ($939,800 as of current).

Longshore and Harbor Workers / The Jones Act

These coverages are important for vessel owners who intend to hire a paid crew, and may be found in the P&I section of a yacht insurance policy.

The Jones Act is a federal statute that provides a right-of-recovery to maritime crew members who have been injured as a result of negligence. Similarly, the Longshore and Harbor Workers' Compensation Act provides maritime workers who are not crew members to recover for injuries caused by the negligence of an insured. Both of these Acts are effectively the maritime versions of workers' compensation.

While most insurers automatically provide coverage for the Longshore and Harbor Workers' Compensation Act, coverage for the Jones Act is typically not included but may be added on for an additional premium.

Navigational Limits

When issuing a policy, insurance providers will include a specific navigational territory.

Coverage for your vessel will only apply within the territory defined by your policy. It is crucially important for insureds to remain conscientious of this and to only operate within their respective territories to maintain coverage. Failing to do so may permit an insurer to deny a claim or void coverage altogether.

Insureds who intend to operate their vessel beyond their insurer's standard navigational territory may opt to expand this limit when their policy is issued. However, doing so may increase the annual premium on their policy.

Uninsured Boaters

Coverage for Uninsured or Underinsured Boaters protects insureds from losses or injuries arising from an at-fault third party who does not carry adequate insurance.

Because liability insurance is not required by law to operate a vessel, insureds may be exposed to the risk of being involved in an accident with an at-fault boater who does not carry the necessary insurance to cover their damages. Coverage for Uninsured or Underinsured Boaters is designed to provide compensation to an insured or any person(s) aboard their vessel for injuries or damages caused by a third-party who does not carry liability insurance. In situations where the third-party cannot be identified, this coverage may help to offset the financial impact of any injuries or damages incurred.⁸

Surveys & Inspections

A marine survey is a detailed inspection of a vessel's interior and exterior, including its hull, deck, fuel system, and more. If you own an older vessel, your insurance provider's underwriter may request a recent marine survey prior to quoting or insuring it.⁹

Surveys are used by insurers to determine the safety, condition, and value of a vessel. This information is particularly useful in determining the policy limits of an insurance agreement. Performing a survey may also uncover any preexisting issues that may influence an insurer's decision in offering a policy.

While surveys are more common with older vessels, mandates vary by company. Some insurers may require a survey for every boat they insure, new or old, while other insurers provide more flexibility or will accept a past survey.

Exclusions

While marine insurance policies are well known for providing comprehensive coverage, all yacht policies contain exclusions, regardless of the scope or extent of their coverage.

While exclusions vary from insurer to insurer, some common exclusions include:

Wear and tear, gradual deterioration, or weathering;
Damages or losses due to negligence or misconduct of the insured;
Damages or losses caused by insects, animals, or mold;
Damages or losses caused by marine life;
Faulty, defective, or improperly maintained machinery or parts;
Equipment or accessories not installed by the manufacturer during the original sale;
Improper storage or transportation;
Damages or losses caused by an uninsured operator;
Damages or losses that occur outside the policy's navigational limits;
Damages or losses that result out of a special event or competition.