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.