What Is Policy Excess in Yacht Insurance?

Policy excess in yacht insurance is the amount you, the boat owner, agree to pay out of pocket before your insurance company covers the rest of a claim. It’s also known as a deductible. It’s a way to share the risk between you and your insurer. The higher your excess, the lower your premium, and vice versa. This guide will explain how it works, when it applies, and how it interacts with other parts of your policy.

What Is Policy Excess in Yacht Insurance?

Plain Language Definition

Policy excess is the amount you pay first when you make a claim. For example, if your policy has a $5,000 excess and your boat is damaged in a storm, you pay the first $5,000, and your insurer pays the rest (up to your policy limits).

Why It Matters

Excess is a key part of your insurance because it affects how much you pay in premiums and how much you pay when something goes wrong. It’s a trade-off: higher excess means lower premiums, but you’ll pay more in the event of a claim.

How Excess Works in Different Types of Yacht Insurance

Hull & Machinery Cover

This is the most common type of yacht insurance. It covers damage to your boat’s hull, engine, and onboard systems. Most policies have a fixed excess for this cover, such as $2,000 or $5,000. You pay this amount first, and the insurer covers the rest.

Protection & Indemnity (P&I)

P&I insurance covers third-party liabilities, like if your boat hits another vessel or causes injury. Some P&I policies have an excess for certain types of claims, such as pollution or crew injury. For example, you might have a $10,000 excess for pollution claims.

Agreed Value vs Actual Cash Value (ACV)

Agreed value means you and the insurer agree on a value for your boat upfront. If it’s totaled, you get that agreed amount, minus your excess. ACV means the insurer pays the current market value, which can be lower. Excess applies in both cases, but the total payout may differ.

Named-Storm Deductibles

Some policies have a special excess for damage caused by named storms (like hurricanes). This is often a percentage of the boat’s value. For example, a 5% named-storm deductible on a $1 million boat means you pay $50,000 before the insurer pays anything.

Scenario: Damage Occurs While Outside Navigation Limits

What Happens If You’re Outside Your Policy’s Navigation Limits?

Most yacht insurance policies limit where you can operate your boat. If you’re damaged outside those limits, your excess may still apply—but your coverage might be reduced or denied altogether.

Example: $500,000 Yacht with 5% Named-Storm Deductible

Your policy says you can only operate within 100 nautical miles of shore. You take your boat further out and get hit by a hurricane. The damage is $150,000.

• Your policy has a 5% named-storm deductible: 5% of $500,000 = $25,000
• You were outside navigation limits, so the insurer may reduce or deny coverage
• If they still pay, you pay the $25,000 deductible first
• Insurer pays the remaining $125,000 (if coverage applies)

Scenario: Damage Occurs During a Lay-Up Period

What Is a Lay-Up Period?

A lay-up period is when your boat is out of commission, like during the winter. Some insurers allow you to reduce your premium if you lay up your boat in a secure location.

What Is a Lay-Up Warranty?

A lay-up warranty is a set of conditions you must follow to keep your insurance valid during lay-up. For example, you must store the boat in a dry, secure location and not use it for any reason.

Example: $300,000 Yacht with $2,000 Excess

You lay up your boat in a dry storage facility. A storm hits and the facility’s roof collapses, damaging your boat for $20,000.

• Your policy has a $2,000 excess
• You were in a covered lay-up location
• You pay the first $2,000
• Insurer pays the remaining $18,000

Scenario: Damage Occurs Due to a Crew Injury

What Is Crew Liability?

Crew liability is part of your P&I cover. It protects you if a crew member is injured while working on your boat. Some policies have an excess for crew injuries.

Example: $10,000 Crew Injury Excess

A crew member slips and breaks their leg while working on your boat. Medical costs are $15,000.

• Your policy has a $10,000 crew injury excess
• You pay the first $10,000
• Insurer pays the remaining $5,000

How Excess Affects Total Loss Claims

What Is a Total Loss?

A total loss happens when the cost to repair your boat is more than its value. In this case, your insurer pays you the agreed value (or ACV), minus your excess.

Example: $400,000 Yacht with $5,000 Excess

Your boat is damaged beyond repair in a collision. The agreed value is $400,000.

• Insurer pays $400,000
• You pay the $5,000 excess
• You receive $395,000

How Excess Differs From Other Policy Limits

Excess vs. Policy Limits

Excess is the amount you pay first. Policy limits are the maximum amount your insurer will pay for a claim. For example, if your policy has a $1 million limit and a $5,000 excess, you pay $5,000, and the insurer pays up to $995,000.

Excess vs. Salvage and Wreck Removal

Salvage and wreck removal are services the insurer may use to recover or remove a damaged boat. These costs are usually separate from your excess and paid by the insurer.

Key Takeaway

Always read your policy to understand what your excess is, when it applies, and how it interacts with other parts of your cover. A $5,000 excess may seem small, but it can make a big difference in your out-of-pocket costs. Choose your excess carefully to balance cost and coverage.