A Guide to Total Constructive Loss Yacht Insurance  

A Guide to Total Constructive Loss Yacht Insurance

Yacht insurance can be very tricky to understand because there is a wide variety of dangers and risks involved with owning a yacht and the insurance companies know that full coverage with no loop holes can set them up to have to pay claim after claim. Instead of offering a no-holds-barred full coverage plan most insurance companies describe what is covered and only sometimes specifically state what is not covered. The result is that a yacht owner may look at the coverage and feel it will cover almost everything when in reality many common occurrences and damages are not covered.

There are two main types of coverage including time based plans and single voyage plans. Plans that cover a given period of time will cover your yacht against damage or loss within that time period, whether at sea or dock. Single voyage insurance will only cover your yacht while on the specified voyage. This can be more cost effective if you do not go on many trips, but will not cover your yacht if, for example, hit by a hurricane while at the dock. Under most plans the cargo and personal items on the yacht are also covered.

In the eyes of a marine or yacht insurance policy, a loss can be partial or total. A partial loss means the yacht can be repaired or recovered for less than the total value of the yacht or policy, and the insurance company will cover the costs. A total loss can either be actual or constructive. An actual total loss means the yacht or the cargo is too damaged to be recovered or reach their destination. For example, if a piece of cargo is knocked overboard during a storm, it is an actual loss. Total constructive loss is different than an actual total loss because the yacht or cargo does not need to be beyond recovery. Total constructive loss is a type of claim that can be made when the damage to the yacht or cargo is severe enough that the cost of recovering and repairing it exceeds the value of the yacht itself, or the insured value of the cargo. The yacht or cargo does not need to actually be lost, but it is virtually lost because the damage or cost of recovery exceeds the insured value. In cases of actual loss no formal abandonment claims need to be made. However, in cases of total constructive loss a claim of abandonment must be made before the total constructive loss claim can be made.

As a yacht owner, you can use yacht insurance or boat insurance. With yacht insurance an agreed upon value is used. In cases of total constructive loss, the actual cost of the yacht or cargo is not the determining factor, it is the agreed upon value as described in the policy. Both the insurance carrier and the owner of the items being insured must agree upon this value. With boat insurance there is no agreed upon value and the insurance company determines their own value for the yacht at the time of the claim based on depreciation. Be aware that pleasure boat insurance often only covers a specific operating area rather than the whole world.


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