The devil is in the detail

What constitutes good yacht insurance?

"Can't we just get summer coverage? We really use our boat only in the summer." This and similar questions are often put to Dirk Hilcken, Sales Operations Manager Germany at insurance expert Pantaenius. "People just aren't aware of the dangers that lurk in winter storage." Forty percent of the adjusted damage volume at Pantaenius has its origins here, caused in most cases by storms and fire.

By giving talks on the most common causes of damage, Hilcken provides regular advice on the potential dangers, and he encourages his listeners to take a very close look at the insurance terms and conditions. "Uncertainty can be costly. But owners often come to that realisation when it's too late," says the damage expert. He says the difficulty is that people often don't know what to pay attention to when they're comparing various insurance offers.

Was macht eine gute Yachtversicherung aus?For instance, "Fixed Value": Even though, thanks to Pantaenius, Fixed Value should today be the most common form of hull insurance, most insurance companies work with more or less hidden market-value coverage. Often, the policy is then written with reference to value under the German Act on Insurance Policies (Versicherungsvertragsgesetz) while characterising it as "Fair Value".  If that is the case, it will be investigated in the event of damage whether there is a considerable discrepancy between the policy amount and the market value, meaning that for a total loss, the proceeds paid out are not the policy amount for which the owner had for years paid premiums but rather the value of the vessel at the time of damage. At the same time, deductions are also made for age, wear and tear, and condition of maintenance -- which is of course difficult to determine in the event of a total loss. But what good is the best insurance if you can't use it to buy another vessel of equal value? "We want our customers to be able to take one glance at the policy and know what to expect from us in the event of a total loss. That's why we state in our terms and conditions that Fair Value is equivalent to replacement value, meaning that the insured value is guaranteed by us in this amount."

Another aspect is the topic of residual value, which, as Hilcken knows, is interpreted very differently, depending on the insurance company: "The important thing is that our insurance terms and conditions provide that the deduction from proceeds is only for realisable residual value." This does not mean the residual value ascertained by some adjuster but rather a demonstrable sales possibility, for instance, a binding purchase offer. After all, what are you supposed to do with no vessel and a rig that doesn't fit anywhere else and is therefore unable to be sold?

One point that Hilcken repeatedly raises in his talks are disposal, salvage, and wreck-removal costs, which many owners have often completely overlooked. "Many insured owners believe that wreck removal or salvage is covered by liability insurance. Nothing could be further from the truth. For this reason, it has to be made part of hull insurance and, moreover, separate from the policy amount and unlimited in amount. Salvage expenses often can quickly exceed the value of the vessel."

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