What Yacht Insurance Doesn't Cover During Handover

Yacht insurance is essential, but it doesn’t cover everything—especially during the handover period when your boat is transitioning between ownership or being delivered. During this time, certain risks are excluded, and understanding what your policy doesn’t cover can help you avoid unexpected costs. This guide explains the key exclusions during superyacht handover, including navigation limits, lay-up periods, agreed value vs. actual cash value, and more. You’ll also find real-life scenarios with numbers to help you see exactly what you might be responsible for.

What Happens to Your Coverage During Handover?

Insurance Coverage May Be Temporarily Suspended

When a yacht is being handed over from one owner to another, the insurance policy may be paused or transferred. During this time, the boat is often not covered under any policy. This can leave it vulnerable to damage or theft. For example, if the yacht is being transported to its new owner and something happens, the new owner’s policy may not yet be active, and the previous owner’s policy may have been canceled.

Who Is Responsible for Coverage?

During handover, it’s crucial to clarify who is responsible for insurance. If the previous owner cancels the policy before the handover is complete, and the new owner hasn’t yet arranged coverage, the yacht is uninsured. This is a common gap in coverage that many owners overlook.

Navigation Limits and Handover

How Navigation Limits Change Your Cover

Most yacht insurance policies specify where the boat can be operated. These are called navigation limits. If the yacht is moved outside these limits during handover, it may no longer be covered. For example, if your policy says the boat can only be in the Mediterranean, but it’s being delivered to the Caribbean during handover, any damage that happens there may not be covered.

Scenario: Damage Occurs Outside Navigation Limits

Imagine you own a $500,000 yacht with a policy that limits navigation to the Mediterranean. During handover, the boat is being delivered to the Caribbean, but the new owner’s policy isn’t active yet. A storm hits, and the boat suffers $100,000 in damage. Because the boat was outside the navigation limits, the insurance doesn’t cover the damage. You pay the full $100,000 out of pocket.

Lay-Up Periods and Handover

What Is a Lay-Up Period?

A lay-up period is when a boat is not in active use and is stored, often for maintenance or during a transition. During handover, the yacht may be in a lay-up state while the new owner arranges insurance or takes possession.

Lay-Up Warranty Requirements

Some insurance policies require the boat to be in a specific condition during lay-up, such as being dry-docked or properly secured. If the boat is not in compliance with these requirements during handover, the insurance may not cover any damage that occurs.

Scenario: Damage During Improper Lay-Up

Your $800,000 yacht is being handed over and is stored in a marina during the transition. The policy requires the boat to be dry-docked during lay-up, but it’s left in the water. A storm causes $150,000 in damage. Because the boat wasn’t in compliance with the lay-up warranty, the insurance doesn’t cover the damage. You pay the full $150,000.

Agreed Value vs. Actual Cash Value During Handover

What Is Agreed Value?

Agreed value is the amount you and the insurer agree the boat is worth. If the boat is damaged or destroyed, you’re paid that agreed amount, regardless of the current market value. This is common in high-value yachts.

What Is Actual Cash Value?

Actual cash value (ACV) is the current market value of the boat, minus depreciation. If the boat is damaged, you’re paid the ACV, which is usually less than the original purchase price.

Why This Matters During Handover

During handover, the agreed value may no longer reflect the boat’s current value. If the new owner hasn’t updated the policy, the agreed value might be higher than the boat is worth, leading to over-insurance. Or it might be lower, leading to under-insurance and a higher out-of-pocket cost if the boat is damaged.

Scenario: Under-Insurance During Handover

Your $1 million yacht was insured for $900,000 in agreed value. During handover, the boat is damaged in a collision and needs $800,000 in repairs. Because the agreed value is higher than the repair cost, you get the full $900,000. But if the policy had been based on actual cash value, and the boat was worth $750,000, you’d only get $750,000. Either way, it’s important to update the policy during handover to reflect the current value.

Salvage and Wreck Removal Exclusions

What Is Salvage?

Salvage is the recovery of a damaged or wrecked boat. If the boat is damaged during handover and needs to be recovered, the insurance may not cover the cost of salvage or wreck removal if the boat is not in active use or not covered under the policy at the time.

Scenario: Salvage Costs After Handover

Your $600,000 yacht is being handed over and runs aground during the transfer. The boat is damaged and needs to be salvaged. The cost of recovery is $100,000. If the boat wasn’t covered under any policy at the time of the incident, you pay the full $100,000 for salvage and wreck removal.

Other Key Exclusions During Handover

Crew Liability

If the yacht is staffed during handover, crew liability coverage may not be active. If a crew member is injured or causes damage, the insurance may not cover it if the policy hasn’t been updated to include the new crew.

Personal Effects

Personal items on board, such as electronics, clothing, or artwork, may not be covered during handover if the policy is paused or not yet active. This can lead to significant out-of-pocket costs if something is lost or damaged.

Pollution Liability

If the yacht leaks fuel or oil during handover, pollution liability coverage may not be active. Cleaning up the spill could cost tens of thousands of dollars, and you may be responsible for the full cost if the policy isn’t in place.

Summary of Key Exclusions

Exclusion	What It Means	What You Pay
Navigation Limits	Damage outside policy area	Full cost
Lay-Up Warranty	Improper storage during handover	Full cost
Agreed Value vs. ACV	Outdated policy value	Gap between value and repair cost
Salvage and Wreck Removal	Boat not covered at time of incident	Full cost

What You Should Do

Before the handover, make sure the insurance policy is active and up to date. Confirm the navigation limits, lay-up requirements, and agreed value. If you’re the new owner, arrange coverage before taking possession. If you’re the outgoing owner, don’t cancel the policy until the handover is complete and the new owner has coverage in place. This small step can save you thousands of dollars in unexpected costs.