Marine Insurance Terminology

Agreed Value:

The Agreed Value is the fair market value of the vessel that is agreed upon between the insured and the insurance carrier. Under Agreed Value policies, if there is a total loss, then the full agreed value is paid without any depreciation. When there is a partial loss, the company will replace old equipment with new to bring the vessel back to its' condition prior to the loss.

Constructive Total Loss:

The position which exists when the cost of repairing or recovering lost or damaged property plus the value of the salvage would exceed the property's value when repaired or recovered.

Deductible:

The deductible is the portion of a loss that is the responsibility of the insured. There is an inverse relationship between deductible and premium. The higher the deductible, the lower the premium. The hull deductible is typically 1% of the hull value. Credits are available for higher deductibles. Lower deductibles are assigned for specific equipment such as personal effects, electronics, fishing tackle, trailers, boatsheds and dinghies. These lower deductibles are separated from the hull deductible, and therefore, reduce your exposure to a loss.

Earned Premium:

This applies when insurance is terminated before the expiry date of the insured period. The earned premium attaching to the period during which the underwriters have been on risk.

Exclusions:

Typical broad exclusions include dishonest, intentional, and illegal acts, fraud, wars, seizures, and nuclear radiation. The marine exclusions include wear and tear, deterioration, corrosion, osmosis, electrolysis, or design defects. Check with your agent for a full list of exclusions that apply to your specific policy.

Lay-up Warranty:

A lay-up period defines the months that the vessel is out of active service. During the lay-up period the vessel is out of commission and is not used for any boating activities. The typical lay-up period is from November 1st to April 1st. Credits are available for longer lay-up periods.

Material Circumstances:

Any circumstances which would influence the judgment of a prudent underwriter in determining whether to accept a risk and the amount of premium to change.

Material Representation:

A statement made to the underwriter before acceptance of risk which is material to the decision in accepting and rating the risk.

Medical payments:

Provides coverage for medical, ambulance, and hospital costs should someone be injured while boarding, leaving, or upon your vessel.

Navigational Warranty:

The policy defines the navigational limitations by a navigational warranty that specifies dates and geographic locations. For instance, a navigational warranty may limit navigation during the hurricane months of June 1st to November 1st in the affected areas.

Pleasure Use Warranty:

If a policy is written for a pleasure craft then it is subject to a pleasure use warranty which means the vessel may not be chartered. Charter endorsements are available to broaden coverage for commercial purposes.

Protection and Indemnity:

This is the liability portion of the marine policy. Typical limits range from $2,000,000 up to $5,000,000 or more. Protection and Indemnity will cover you if you are sued for negligence, causing damage to another vessel or injury to an individual. It provides protection for property or personal injury damages to someone other than yourself or a family member. Under the private pleasure policy, it is not subject to a deductible.

Proximate Cause:

The most direct cause of loss, that is, the most effective, but not necessarily the last, in a series of events.

Seaworthiness Warranty:

The seaworthiness warranty requires that the vessel be maintained in a seaworthy condition at all times. This means the vessel must be in good repair so that the vessel will not be damaged by the normal rigors of the sea.

Subrogation:

The right of the underwriter to step into the shoes of the insured, following payment of a claim, to recover the payment from a third party responsible for the loss. Subrogation is limited to the amount paid on the policy.

Sue and Labour Charges:

Charges incurred by an insured in averting or diminishing a loss. They are recoverable in addition to the full sum insured.

Uninsured Boaters:

The uninsured boaters portion of the policy provides accidental bodily injury protection for injuries caused by an uninsured boater.

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