Owning a ship is a significant responsibility, offering opportunities for excitement, discovery and the thrill of sailing in the open waters. However, even the most experienced sailors face challenges. Picture yourself sailing one day when your ship unexpectedly hits a reef, causing significant damage. The financial aftermath of such an incident could be overwhelming.
This is where hull and machinery (H&M) insurance comes into play, serving as a safety measure for ship owners. It shields your vessel and your finances from unforeseen circumstances as well as risks.
What is hull insurance?
Hull insurance covers damage to a vessel’s structure and machinery caused by risks such as collisions, grounding or storms. It helps shipowners manage repair costs, can apply to a single vessel or a fleet and is often required by lenders to protect financed ships.
Types of marine hull insurance
Hull insurance covers the vessel and its machinery only. Other marine insurance policy like cargo, yacht or marine transit insurance cover different risks.
- Voyage insurance: Covers a vessel for a single, specific journey.
- Fleet insurance: Insures multiple vessels under one policy for easier management.
- Port risk policy: Covers vessels while docked, protecting against risks such as fire, theft or certain natural events.
- Brown-water hull insurance: This covers ships travelling via inland waters that are closer to the shore, like rivers and lakes.
- Blue-water hull insurance: This covers vessels travelling via large waterbodies, like seas and oceans.
Understanding the scope of coverage for hull insurance
H&M insurance offers protection for the physical structure (hull) of your ship, its permanently attached machinery and onboard gear. Marine cargo insurance coverage includes several aspects, such as:
- Accidents and collisions: Unintended collisions with other vessels, stationary objects (such as piers or reefs) or hidden underwater hazards are included. Collisions with floating or submerged objects like debris, icebergs or marine life can result in significant damage. Hull and machinery insurance offers protection for these incidents as well.
- Groundings: Getting stuck on sandbars or other submerged obstacles can be costly mishaps. H&M insurance can help ease the strain of getting your ship afloat and repaired.
- Harsh weather conditions: Unpredictable sea conditions can cause havoc to a vessel. Damage caused by wind, hurricanes, earthquakes, hail, lightning or floods is usually included in H&M insurance coverage.
Apart from these risks, additional options are available with H&M insurance policies based on your choice. These could involve coverage for the following:
- Physical injuries sustained by the ship’s crew
- Damages due to theft/fire/burglary
- Damages sustained due to maintenance activities
- Piracy
- Navigational hazards during transition via lake, sea or river
- Jettison
Note: This is an indicative list. Please read the policy wording for complete inclusions and exclusions.
What does not fall under H&M insurance?
It’s crucial to know what H&M insurance specifically safeguards and what it doesn't. Let’s look at the exclusions of this policy.
- Regular wear and tear of a vessel is not included in H&M coverage.
- Damages from radioactive contamination due to nuclear activity/explosion and acts of war or terrorism are usually excluded from H&M insurance.
- If a vessel is intentionally damaged by its owner or crew, the insurer won't cover repair costs.
- Damage caused by the crew under the influence of alcohol/drugs is exempt from coverage
- Damage resulting from exceeding the ship's cargo weight limit is not part of H&M insurance coverage.
- Loss/damage caused by unlawful activities are not covered
- Sailing during a sea storm despite a warning being issued will not be covered.
Note: This is an indicative list. Please read the policy wording for complete inclusions and exclusions.
Why should you consider investing in H&M insurance?
The advantages of having H&M insurance include the following:
- Financial Security: H&M insurance helps cover repair expenses or even replacement costs depending on the extent of damage.
- Peace of Mind: Having your ship insured lets you sail with peace of mind, focusing on the journey without worries about financial setbacks.
- Loan Requirements: If your vessel is under a loan, most lenders will insist on having H&M insurance as a mandatory condition.
- Customised Plans: You can customise your policy based on your specific requirements, as insurers offer various add-ons and built-in options for marine insurance policies.
- Third-party Liability Coverage: In situations where your ship accidentally collides with another vessel, the insurer will help cover the financial liabilities, irrespective of who was at fault.
How to choose the right hull insurance for your vessel
Choose hull insurance by comparing coverage features, premiums and add-ons to match your vessel’s usage and risks. Check third-party collision liability, understand deductibles and confirm that essential machinery and equipment are covered.
Conclusion
Marine insurance offers a vital layer of protection for your ship, giving you the confidence to sail the seas and knowing that you are safeguarded in all the unexpected situations that might occur during your voyages. However, it's essential to keep in mind that despite having insurance coverage, safe navigation practices and regular maintenance remain essential at all times. Also, remember to carefully review the policy terms to grasp what is covered and what is not.
FAQs
1. Can hull insurance help reduce operational downtime?
Yes, having hull insurance can facilitate quicker repairs and claims processing, helping ship owners resume operations faster after an incident.
2. Are there add-ons available with hull insurance?
Yes, insurers often offer optional cover for crew injuries, piracy or third-party liability to enhance protection beyond standard hull and machinery coverage.
3. How does hull insurance interact with marine transit insurance?
Hull insurance covers the vessel itself, while marine transit insurance protects cargo. Coordinating both policies ensures comprehensive risk management during voyages.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.