Boat owners - are you insured for the Summer cruise?

by Neil Bailey and Sail-World on 13 Jan 2017 With many away for their Summer cruise - did you remember to check your insurance was up to date?

Or do you want to check if the cover you have is the most cost-efficient for your needs?

Either way you can do a quick check - and buy cover online at any stage of your Summer cruise - inside or outside of business hours - and no need to talk to an insurance company office, machine or answerphone.

Baileys Insurance offer a unique online service by which you can get an insurance quote, accept it and you are insured immediately, provided your boat meets certain conditions.

A sound insurance policy is essential for peace of mind when cruising over the Christmas and summer period.

Neil Bailey is the principal of an Insurance Brokerage that bears his name. He is also a boat owner and life-long sailor.

Too frequently boat-owners only find out how good their insurance policy is, and their insurer, after they make a claim.

Often they have made the mistake of by-passing a broker and signed directly with the insurance company - and at the time of the claim have to deal directly with the insurance company and their assessor.

Work through a broker and you firstly get the type of cover you require and then have the services and advice of the broker when you come to make a claim.

There is a reason why insurance companies have a significantly higher percentage of successful claims handled via brokers...

Neil Bailey gives some sound advice from both a broker's and boatie's perspective.

You can also check if you are getting the best insurance on your boat by clicking here

Baileys offer New Zealand boat owners the ability to buy their boat insurance online directly, meaning that you can be insured immediately - not just during business hours. Some boats and requirements will require a discussion with Baileys - but at least you will be talking with a broker who understands boats and the risks and nuances, and not a computer jockey in a call centre.

Over to Neil:

Insurance – a necessary evil? Necessary – yes. “Evil” no. Done properly, it can be your saviour. But get it wrong, and it can send a shiver up your spine! During my 30 years+ experience in the insurance industry, and being heavily involved in the marine sector, I’ve pretty much seen it all.

What I’d like to share with you are some tips on what to look out for, to ensure you really do obtain “peace of mind” – which is what insurance should be all about.

The three key areas to consider are:

- What does the policy actually say?
- How secure is my Insurer?
- How will my claim be handled?

What does the policy actually say?
I could write a whole magazine on this topic. It’s unfortunate, but insurance is generally sold on price. Especially here in NZ, every ad we hear mentions it – “save 20%”, “we could save you lots”… and so it goes on. But what are you saving?

What’s the point in saving a few dollars when the policy you are buying doesn’t do as much as another? It’s also a common misconception that all insurance policies are the same. They’re not. The problem is, you only find out how good it is when a claim arises, and then it may be too late.

My one piece of advice: READ THE POLICY. Ask questions. Don’t just file it away and then be disgruntled when a claim is turned down, or you don’t get paid as much as you thought. This is a legal contract. Keep it with you – read a bit when you’re watching TV and the ads come on, take it with you when you’re waiting at the hairdresser, or doctor’s surgery – have a highlighter pen and mark any bits you don’t understand or think are cause for concern – then ask your Insurer or Broker to explain it. Yes, some policies can be heavy going, but if you follow my advice here, you’ll soon begin to know the key things to look for.

How is a policy structured?

These days, the majority are based on what is known as an “accidental loss or damage” wording – some say “all risks, ” but that’s not a correct term, as there is no Insurer that covers all risks. This type of accidental damage wording basically says that any accidental loss or damage is covered unless it is excluded. Contrast this to the older style policies, where it was based on “named perils” – so if it wasn’t named, you weren’t covered, and several events could fall through the gaps.

The accidental damage wording is far more comprehensive because you only need to be concerned with what’s not covered.

“Accidental,” “loss” and “damage” have defined meanings, so check the definitions in the policy. But it is as it reads – “accidental” for example, meaning an unforeseen event or occurrence from your perspective.


So, the important things to look at in the policy are these:

- What events are not covered (the exclusions)
- How much will I get paid? (the basis of settlement)
- What items are insured? (Look for the definition of what a “boat” actually is)
- Any special terms or conditions to be noted (usually at the end)

Exclusions:
This is the real nitty gritty stuff, and where you need to be very careful. Marine insurance is an unusual beast, and there is the issue of “proximate cause” that needs to be fully understood. “Proximate cause” means the active, efficient cause that sets about a chain of events leading to loss or damage.

When looking at any policy exclusion, check how it is worded – does it say “any loss caused by or resulting from”….for example “vermin.” Let’s take this particular exclusion which many policies have (but not all!) Say a rat got on board your boat (yes, we’ve seen this happen – and it was on a swing mooring!) and it happily went about chewing through everything in sight. It will be looking for water, so it chews through a vital inlet pipe, and the seacock hasn’t been turned off. The result is the boat sinks and is a total loss. What was the “cause” of the damage? What did the damage “result from”?

Interesting questions, and in marine insurance the “proximate cause” goes back a long way to the original cause.

In this case, one could argue that the cause of the loss was vermin. And if your policy excludes damaged caused by or resulting from vermin, then I’m sorry, but this claim could be declined. If you do have a policy with this exclusion, put a scenario to your current Insurer and see what they say. Make sure you get the answer in writing! As I say, it depends on how your policy is worded, but this is a worrying area if your whole boat could be lost and the claim declined because of this one word.

Other specific areas to look for here in a similar vein are losses resulting from “electrical failure” or “mechanical breakdown.” What if there was a fault with the electrical wiring, which caused a spark, resulting in the boat being burnt to the waterline? What if you had a mechanical failure as you were manoeuvring through a rocky outcrop, the engine failed, and you ran into the rocks, holing the boat?

Again, interesting questions and ones that will cause much debate I can assure you! Another interesting area is the exclusion for losses arising while you are “under the influence of alcohol.” What does “under the influence” mean? Of course, we don’t condone drinking and boating, but there’s nothing wrong with a quiet beer or two, at the end of the day. Let’s say you had a few drinks and had to move the boat in the middle of the night, but you ran into some rocks. Were you “under the influence” at the time?

Basis of settlement:

How much will you be paid if you do have a claim? There are two different scenarios – a “total loss” or a “partial loss.” Ideally for a total loss claim you want an “agreed value” policy. This means the sum insured stated in your policy is the agreed amount that will be paid, without argument. Many policies are based on “market value” (even though you’ve specified a sum insured), and this is where the arguments really begin. What’s a fair market value? The opinions will be endless. Best to avoid that debate, and make sure your policy is an “agreed value.” Some Insurers may need to see a valuation to set an agreed value sum insured. Others may rely on their experience to know what is reasonable.

For a partial loss, there are two ways a claim can be settled – either “replacement” value (i.e., “new for old”) or “indemnity” (“depreciated” or “market” value). Ideally, you want the replacement option. So let’s say someone pinched your five-year-old chart plotter. One policy will buy you a new one, the other will say “hang on, that’s five years old, and there have been three new models since then, so it’s not worth a whole lot…” You will find that the majority of policies are based on the indemnity value for a partial loss settlement, perhaps with some items on a “replacement” basis. But there are some out there that are more generous in the replacement provisions.

An interesting conundrum here if you do have an “indemnity” basis of settlement is what happens if your boat is badly damaged down one side and needs a repaint. Your original paint job is ten years old and showing signs of wear. Will the Insurer repaint just the one side, or the whole boat, so you’re set for another ten years or so? Obviously, with a “replacement” type policy the new paint is not up for debate, but if it’s an “indemnity” basis, then there will most likely be a request for a contribution from yourself for “betterment.” More debate!

What items are insured?

A boat is a boat - right? Well, yes – but the definition of a boat and the items contained within it can be different. Especially under an insurance policy. The biggest area to watch out for is the section dealing with “personal effects.” This can differ markedly. A boat insurance policy is not a “home contents” policy. Look at the definition of personal effects under the policy and see what’s not covered, you may be surprised. But then most home contents policies should cover your personal effects anywhere in the country you live, and include on the boat. So if you drop your mobile phone overboard, that’s really a claim under your home contents, not your boat policy.

Do check the definition of “your vessel” and “additional equipment” and make sure you are comfortable that it does include everything on board.

It’s also tricky to come up with a sum insured for specific items – e.g., one figure for the hull and fittings, one for the rig and sails, another for the engines and another for additional equipment. Some Insurers do want you to split these figures up, but if you’ve bought a second-hand vessel for “X” dollars, how do you say what the engine is worth of that? Better to obtain a policy that just has one figure for the whole vessel – perhaps just with a separate item for the dinghy and outboard.

What are the special conditions?

All insurance policies, marine or otherwise have “conditions”. Read them – they could mean the difference between a claim being paid or not. A common one is a boat being left unattended at anchor for more than “X” number of hours. Some we’ve seen say 12, others 24. For permanent moorings, these will generally need to be inspected very three years, or other time frames based on maritime regulations. Also look for any restrictions around single handed sailing. Some Insurers specify a certain number of hours within a 24 hour period as being OK – some are silent on the subject.

Another area to watch carefully is how your policy handles coverage for “named tropical storms,” especially if you are in a prone area in season. Some Insurers will specify a whole raft of requirements for such cover to be provided, whereas others don’t. Some have substantial excesses applicable, again some just have the standard excess applying. It all does depend on where you will be, and at what time of year. But bearing in mind, a storm can be “named” at any time of year – not just within the cyclone “season.”

How secure is my Insurer?

You’d be thinking that surely all Insurers can actually pay up when needed? And thankfully, in this day and age, yes there are regulations in place to ensure that Insurance Companies do have the financial strength required. You should always ask what the financial strength rating is. In fact, it should be told to you as a matter of course. You’re looking for an “A” rating or better, usually provided by Standard & Poors.

This deals only with “financial security,” it is not a rating of how the Insurer performs on claims generally. Ask around fellow boat owners about this aspect, and do some research on line – you’ll soon find out who are the good ones.

How will my claim be handled?

Making a claim is where the rubber meets the road, and regrettably for the industry, often a time of conflict. Why? I believe it is through “expectation versus delivery.” When you expect an event will be covered, but it’s not, or you expect to receive a certain amount as settlement of a claim, but there’s a lower limit applying, this creates the problem. And it goes back again to my very first point – read the policy. Ask questions. If you assume that your policy covers everything, then you will be disappointed and you will feel aggrieved.

Most policies these days are incredibly comprehensive and do cover most eventualities. The ones they don’t cover are understandable, so if you are aware of these, then making a claim may not be such a traumatic experience.

Insurer vs. Broker:

There is a big difference in the relationship you have with an Insurer vs. a Broker when it comes to claims. If you are insured directly with an Insurance Company or perhaps an “Underwriting Agency,” you are dealing with those that hold the purse strings. They are a business and there to make a profit. It is in their interests to minimise any claim settlement because this, in turn, affects their bottom line and keeps the shareholders in a happy space. This may sound a bit harsh and I’m not saying it happens all the time, but I see it day in, day out and have done for over 30 years.

Contrast this to dealing through a good Broker, who is on your side and there to maximise your claim entitlement. This comes about through their knowledge of the policy, and the relationship they have with the Insurer. Sometimes a claim can be a bit “gray” and could legitimately be declined. But if you are through a Broker who has a good understanding of how policies operate, and they have a good working relationship with the Insurer, perhaps with a substantial book of business with them also, then such a claim can be looked at in a more favourable light. If you are just “joe blogs” off the street with one policy, then you may not be looked at in the same way.


Assessors:

An Insurer will often appoint an Assessor to be their eyes and ears, especially when it is a substantial loss. They are there to report the facts, and ensure the repair costs are reasonable. An Assessor may either be “in house” or independent. An Assessor can make or break a claim, and some don’t fully appreciate the impression they convey of the Insurer and/or Broker.

Help Them To Help You:

Whether dealing with an Assessor or direct with the claims staff at the Insurance Company, the key thing is to provide detailed information and do what you can to help and minimise claim costs. It is also important to notify the Insurer of a claim as soon as you are aware of it. This allows them to fully investigate the circumstances and arrange any repairs or replacement of items at a reasonable cost. A delay in notifying them may prejudice their rights and cause problems. This is also the case if there is a chance of any recovery of costs from an “at fault” third party. It is important to give your Insurer full and timely details of the other person or vessel involved. This will also aid in the recovery of your policy excess if you weren’t at fault.

You may need to do a bit if running around to provide quotes or proof of ownership for replacement items, and this may seem a hassle at the time, but it is worth it, in the long run, to assist as much as you can. Insurance Companies love their bits of paper!

And after all, that’s all an insurance policy is – a promise on a piece of paper. It’s important to ensure that promise is kept.

In Summary:

Read through the exclusions section of your policy – check how they are worded, and highlight any that you need to clarify – ASK QUESTIONS!

- Check if your policy is “agreed value” or “market value” for a total loss?

- Check if you have a “replacement” basis of settlement or “indemnity” for a partial loss claim

- Does your policy exclude some items you have on the boat? Are they covered by another policy perhaps?

- Are there any conditions in the policy you won’t be able to comply with?

- Be aware of excesses applicable

- Are there any special requirements or higher excesses surrounding named or numbered windstorms?

- Look for an Insurer that has an “A” rating or better

- Consider the benefits of using a Broker vs. direct with an Insurer

- Provide detailed and timely information in relation to any claim

You can check if you are getting the best insurance on your boat by clicking here

As well as marine insurance, Baileys Insurance handle all types of cover including life and health, business and commercial. Call 0800 898585 for your one stop insurance broker.