Marine Insurance Glossary

Marine Insurance Glossary

Act of God – A natural event such as flood, storm, lightning, or earthquake not caused by nor preventable by any human agency.

Actual Total Loss – refers to a situation where the boat is totally lost or destroyed.

Assignment – This is when you the insured transfers your rights under the policy to a third party, in the case of boat insurance this usually refers to mortgagors i.e. the bank who loaned you the money to buy the boat. You must tell your insurance company if this is the case.

Average – In the situation where an insured has under-insured, i.e. insured an item for less than it is worth, average will apply to reduce the amount payable. There are different ways of calculating average, but generally the same proportion of under-insurance will be applied to any payout due.

Barratry – Any wrongful act committed without your knowledge or participation and to your prejudice by anyone using or on board the boat without your permission.

Betterment – An improvement that adds to the value of the property.

Conditions and warranties – In English law, a condition typically describes a part of the contract that is fundamental to the performance of that contract, and, if breached, breaches the contract as a whole. By contrast, a warranty is not fundamental to the performance of the contract and breach of a warranty will not lead to a breach of the contract. The meaning of these terms is reversed in insurance law. Thus, the Marine Insurance Act 1906 refers to implied warranties, one of the most important of which is that the vessel is seaworthy.

Constructive Total Loss – refers to a situation where the loss of the boat is inferred. In practice, a Constructive Total Loss might also be used to describe a loss where the cost of repairing the boat is not economic; ie a ‘write-off’.

Deductible – See Excess.

Endorsement – An alteration in writing to the terms of the boat insurance policy.

Excess – the amount payable by you, the insured in the event of damage or loss. An excess may or may not be applied. It may be expressed in either monetary or percentage terms. An excess is typically used to discourage moral hazard and to remove small claims, which are disproportionately expensive to handle. The equivalent term to ‘excess’ in boat insurance is ‘deductible’ or ‘retention’.

In Commission period – This is the period when the boat is not required to be laid up and may be used in navigation including lifting, hauling out and launching.

Indemnity – Restoration to the victim of a loss by payment, repair or replacement.

Insurable interest – A policy without insurable interest is void this means the law prevents people taking out an insurance policy on someone else’s property, unless they have a legal or financial interest in that property.

Latent Defect – A defect which is not discoverable by the exercise of reasonable care.

Lay up period – This is the period when the boat must not be used for any purpose except for the carrying out of minor maintenance and repairs and must be laid up at the place named in your Proposal Form or any other place agreed in writing.

Material facts – Facts that would influence the insurer when deciding whether to insure you or not and the terms and conditions they want to apply. If you are unsure whether it is a material fact you should disclose it anyway.

Personal effects – This means your personal belongings, which have been bought because you own a boat.

Salvage – Refers to the practice of rendering aid to a boat in distress. Apart from the consideration that the sea is traditionally ‘a place of safety’, with boaters honour-bound to render assistance as required, it is obviously in underwriters’ interests to encourage assistance to boats in danger of being wrecked.

Sue and labour – a term used by underwriters to cover the reasonable costs incurred by you the insured in avoiding a greater loss.

Uberrimae fides – imposes a duty on you the insured that all questions must be answered honestly and the risk is not misrepresented.

Valued (Unvalued) policy – A valued policy means the sum insured for the boat is agreed at the start of the policy and is the amount that will be paid in respect of a total loss irrespective of the actual value of the boat at the time of the loss. In contrast an unvalued policy is based on the value of the boat at the time of the loss.

War, civil disturbance and terrorism – includes international war, any act of hostility by a nation or state against another, civil war, revolution, rebellion or insurrection, detonation of a derelict mine, torpedo, bomb or other weapon of war, labour disturbances, acts of terrorists and acts of persons in furtherance of a political motive.

Wear & Tear – The ordinary wearing away of the various parts of a vessel, machinery, and equipment through use. Such damage is not accidental in nature, but is inevitable.

Willful misconduct – Includes being under the influence of alcohol or other prohibited drugs so as to impair safe navigation or management of the boat.

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