Yacht Insurance: Gone with the Wind

Hurricane Season is a difficult time on the East Coast and Gulf Shores of the U.S. for boat owners as well as the marine industry in general. Officially, this period of time runs from June 1 to November 30 with peak activity between August 15 and October 15th. An excellent example of this is the Hurricane Seasaon where a record four hurricanes made landfalls in August/September causing billions of dollars in property damage.

Each year, the marine insurers keep a wary eye toward hurricane & windstorm activity. Carriers will routinely issue a moratorium on writing new policies or making changes to existing contracts when there is a named or numbered windstorm developing in the Caribbean Basin. Since there is no fixed time span on a moratorium, keep in touch with your insurance agent for updates. Those individuals that are purchasing, selling, brokering, financing & insuring boats find themselves in a holding pattern, unable to complete their transactions until the storm passes.  Buyers can’t buy, sellers can’t sell, brokers & banks cannot close their deals until the market for insurance reopens.

Insurance companies manage risk. When they see the high risk of a windstorm on the horizon, they seek to limit the exposure that they already have by freezing any new liabilities. Today, most yacht insurance premiums are based on the fact that most losses and claims are of a partial nature with very few total losses. For the most part premiums are affordable under this premise.

When you throw in a large amount of total losses this formula breaks down quickly. Hurricanes cause total losses and the insurers will move to limit their exposure as quickly as possible. The best thing to consider when buying a boat during Hurricane season is that the insurability of a yacht is not a sure thing and one should consider this in the contractual obligations of a yacht purchase. Ask that an insurance clause be put in the contract that would allow you to postpone a settlement in the event of a hurricane moratorium on insurance.

For current owners of private vessels, here are a few good preparation tips for Hurricanes:

1. Make & continually refine a hurricane plan for the protection of your boat. Have an alternative plan as well.
2. Keep in mind that your insurance company requires due diligence in your care & maintenance of the yacht.
3. The general consensus of insures is that you should take steps to protect your property as if you did not have insurance.
4. Take photos or video of your boat & equipment before you prep it for a storm. Do the same after you prepare it, to document your efforts.
5. Find your policy & read it (most people don’t). Make sure you have your agent’s telephone number & that of the claims department for the carrier and write those numbers on your policy jacket and take it with you OFF of the boat.
6. Understand that most carriers have a separate WINDSTORM deductible that applies. This deductible applies to all losses, even total loss.
   

A small amount of physical & clerical preparation in advance of a hurricane or windstorm will greatly reduce your stress in the event you suffer a loss. This preparation will also enable you to streamline the claims process.