Ensuring your insurance policy is up to scratch

Specialist marine insurers such as Nautilus Marine Insurance are the ones to be with when it comes to vessel write-offs and considering what is and what is not, ‘damage beyond economic repair’.

Why? Because specialist marine insurers know the value of boats and equally as importantly, they know today’s costs of replacing them. That’s a critical factor for the boat owner. So, how do you go about ensuring your insurance policy is up to scratch?

Consider this hypothetical scenario – eight years ago a person bought a new, brand name, 6m powerboat, motor, trailer and electronics package for $85,000. For the past six years, the owner has taken his rig back to the authorised marine dealership from where the boat was bought, and requested a formal valuation. The dealership has confirmed in writing, every year, that the boat package has a current market value of $80,000.

Every year the owner has provided the dealership’s documentation to the insurer, as evidence confirming the boat’s outstanding condition and its true value. And every year, the marine insurer has accepted $80,000 as the agreed value of that boat having regard to how the owner has kept it in immaculate condition.

Now let’s assume that during the term of the policy, something very untoward happens to the boat – it is stolen, or terminally damaged. Let’s also assume that the circumstance is clearly covered in the product disclosure document and insurance contract.

The insurer therefore is prepared to pay out the $80,000 to the owner as the agreed value. However, had the owner not continued to provide evidence of the real, current value of the rig, some policies would default from the ‘agreed sum insured’ to the ‘market value’ of the vessel. And in this circumstance, the payout figure would be based on a typical value for a boat of that model and vintage and how it typically had been used and looked after.

Consequently, the payout figure might drop significantly – perhaps to $60,000. Bear in mind that eight years later, the real replacement cost for a new boat might now be very much higher than the original $85,000 purchase price.

This time let’s assume the boat was severely damaged in an accident. A non-specialist marine insurer might be inclined to write the loss off, if the estimated repair costs amounted to 70 percent of the market value. The insured would still get the entitled amount of the payout, but would now miss out on having a 6m boat because the insurer determined it to be damaged beyond economic repair.

The owner’s boat does not get fixed and he or she knows a new replacement boat cannot be afforded. The owner is in a financial hole. Even more so, if the owner had allowed the boat to lapse into general ‘market value’ rather than its immaculate ‘agreed value’.

However, a specialist like Nautilus Marine Insurance, which is focused on boat insurance rather than trying to insure your house, pets, health and household effects, is well aware of the issue likely to be confronting the boat owner. And with that possibly comes a solution.

It may consider the boat to be an acceptable economic repair even if the repair bill represents 80 percent of agreed value depending on the type of repair required and the salvage value. That way, the owner has the boat fully repaired – perhaps even by the original boat manufacturer if the company offers this service. The owner is now back in a 6m boat without being trapped in the gulf between the payout figure and the now-unaffordable cost of buying a new replacement.

Being a specialist, Nautilus Marine Insurance understands the industry, its participants and the realities of the way it operates. In the past, Nautilus has even negotiated directly with manufacturers on behalf of insured clients to achieve a satisfactory outcome. And that’s a key difference between dealing with an industry specialist when it comes to insurers.

In the same way as a person might look for a specialist livestock insurer for a prize bull, a specialist marine insurer is the place to start looking when you want to insure your boat. Ensuring your insurance policy is up to scratch includes always checking your PDS thoroughly. Make yourself aware about whether it defaults to market value after a certain time. If so and you would prefer ‘agreed value’, go to a respected marine dealer (probably the one you bought your new boat from) have them inspect it, appraise its true value and prepare a market valuation form. Then, when you renew the premium, attach that accurate market valuation form to your policy renewal application.

You may or may not find yourself paying a few dollars more because the value of your boat is recognised as being higher, but when it all goes pear-shaped, you can expect to be paid the agreed figure, rather than a depreciated market value figure that was based on average value. When it comes to marine insurance, always check your PDS and if you have a query, ask your insurer for clarification. Any special conditions and excesses should always be explained clearly in your insurance policy’s PDS.

If you need further information about ensuring your insurance policy is up to scratch, you can contact Nautilus Marine Insurance on 1300 780 533 for any boat insurance requirements.