What's Not Covered in Superyacht Handover Policies?

Superyacht handover policies are designed to protect your boat during the transition period between ownership, but they come with important exclusions. These policies typically cover damage to the hull and machinery, but only under certain conditions. Understanding what’s not covered can help you avoid unexpected costs. This guide explains the key exclusions in handover policies and shows you exactly what you might be responsible for in real-life situations.

What Is a Superyacht Handover Policy?

Short Definition

A superyacht handover policy is a temporary insurance policy that covers a yacht during the period between the sale and the start of the new owner’s regular insurance policy. It’s meant to fill the gap and protect the boat during the handover process.

Why It Matters

Handover policies are not full insurance policies. They are limited in scope and duration, often lasting just a few days or weeks. This means they come with specific exclusions that you need to be aware of to avoid being left out of pocket.

Common Exclusions in Handover Policies

1. No Crew Liability Coverage

Handover policies typically do not include crew liability coverage. This means if a crew member is injured while moving the boat, the policy won’t cover medical costs or legal fees related to the injury.

2. No Protection & Indemnity (P&I) Coverage

Protection & Indemnity (P&I) insurance covers third-party liabilities, such as damage to other boats or environmental damage. Handover policies usually exclude P&I coverage, leaving you responsible for these costs if they arise during the handover period.

3. No Pollution Liability Coverage

If your yacht accidentally causes an oil spill or environmental damage during the handover, a handover policy typically won’t cover the cleanup or legal costs. You’ll be on the hook for these expenses.

4. No Personal Effects Coverage

Handover policies do not cover damage to personal items on board, such as electronics, artwork, or furniture. If something is damaged during the handover, you’ll have to pay for it out of pocket.

How Navigation Limits Affect Your Coverage

What Are Navigation Limits?

Navigation limits are the specific geographic areas where your insurance is valid. If your yacht is damaged outside of these limits, the policy won’t cover the cost.

Scenario: Damage Outside Navigation Limits

Let’s say you have a $5 million superyacht with a handover policy that limits coverage to the Mediterranean. If the yacht is damaged while sailing in the Caribbean, the policy won’t cover the repair costs. You’ll be responsible for the full amount.

Understanding Lay-Up Periods and Warranties

What Is a Lay-Up Period?

A lay-up period is when a yacht is not in active use, such as during the handover. Some handover policies require a lay-up warranty, which means the yacht must be in a dry, secure location and not being used during the policy period.

Scenario: Breach of Lay-Up Warranty

If your handover policy requires the yacht to be in dry storage and you instead keep it in the water and it’s damaged by a storm, the policy won’t cover the damage. You’ll pay for repairs yourself.

Agreed Value vs. Actual Cash Value

What’s the Difference?

Agreed value is the amount you and the insurer agree the yacht is worth at the start of the policy. Actual cash value is the current market value, which can be lower due to depreciation.

Scenario: Agreed Value vs. Actual Cash Value

You have a $3 million yacht with an agreed value policy. If the yacht is totaled in an accident, you’ll receive the full $3 million. With an actual cash value policy, you might only get $2.5 million due to depreciation. Handover policies often use actual cash value, so you may get less than expected in a total loss.

Named-Storm Deductibles

What Is a Named-Storm Deductible?

A named-storm deductible is a higher percentage of the policy limit you must pay if damage is caused by a named storm, like a hurricane. Handover policies may include this type of deductible, increasing your out-of-pocket costs in bad weather.

Scenario: Named-Storm Deductible

Your $4 million yacht is damaged by a hurricane. Your handover policy has a 10% named-storm deductible. You must pay $400,000 before the insurer covers the rest. If the damage is $1 million, you’ll pay $400,000, and the insurer will pay $600,000.

Salvage and Wreck Removal

What Is Covered?

Salvage and wreck removal coverage pays for the cost of recovering a damaged or sunken yacht. Handover policies may exclude this coverage, leaving you responsible for the cost of recovery.

Scenario: No Salvage Coverage

Your $2.5 million yacht sinks in a storm. The cost to raise and recover the yacht is $300,000. If your handover policy doesn’t include salvage and wreck removal, you’ll have to pay the full $300,000 yourself.

Seaworthiness and Total Loss

What Is Seaworthiness?

Seaworthiness means the yacht is in good condition and safe to sail. If the yacht is damaged due to being unseaworthy, the policy may not cover the damage.

What Is a Total Loss?

A total loss is when the cost to repair the yacht exceeds its value. Handover policies may not cover total losses unless the damage is due to a covered peril.

Scenario: Total Loss During Handover

Your $6 million yacht is damaged beyond repair during the handover. If the damage is due to a covered peril, the policy may pay the agreed value. If the damage is due to an uncovered cause, like poor maintenance, you’ll pay the full cost of the loss.

Real-World Scenarios with Numbers

Scenario 1: Crew Injury During Handover

You’re moving your $3 million yacht and a crew member is injured. Medical costs are $100,000. Since your handover policy doesn’t cover crew liability, you’ll pay the full $100,000.

Scenario 2: Damage Outside Navigation Limits

Your $4 million yacht is damaged in the Atlantic, but your handover policy only covers the Mediterranean. Repair costs are $200,000. You’ll pay the full $200,000 because the damage occurred outside the policy’s navigation limits.

Scenario 3: Named-Storm Deductible

Your $5 million yacht is damaged by a hurricane. Repair costs are $1 million. Your handover policy has a 10% named-storm deductible. You’ll pay $500,000, and the insurer will pay $500,000.

Key Exclusions Summary

• Crew Liability: Not covered in handover policies.
• Protection & Indemnity (P&I): Not included in handover coverage.
• Pollution Liability: Damage to the environment is not covered.
• Personal Effects: Damage to onboard items is not covered.
• Salvage and Wreck Removal: Recovery costs may not be covered.
• Named-Storm Deductible: You may pay a higher percentage for storm-related damage.
• Navigation Limits: Damage outside the policy area is not covered.

What You Should Do

Before accepting a handover policy, read the fine print and understand exactly what is and isn’t covered. Ask your broker to explain any exclusions in simple terms. Make sure you know the navigation limits, deductible amounts, and any required lay-up conditions. This will help you avoid surprises and protect your investment during the handover period.