Marine insurance is broad, which explains why there are a lot of different types of coverage such as freight demurrage and defence insurance, hull insurance, and protection and indemnity insurance. A 2015 review by the United Nations Conference on Trade and Development said that maritime transport is the backbone of international trade and the global economy, with 70% of global trade by value and 80% of global trade by volume handled by ports worldwide. Additionally, the very nature of the shipping industry makes seafaring one of the most dangerous jobs in the world.
In fact, there has been a reported number of at least 2,000 maritime workers who lose their lives every year. With these in mind, it is not an option to disregard the necessity of marine insurance as it is designed to mitigate unforeseen accidents such as loss of life and damage to property. As if the task of shopping for the right marine insurance is not overwhelming enough, boat insurance terminology can also be downright confusing to many first-time insurance buyers. While there are a lot of similarities between marine insurance and other forms of insurance, there are terms that are specific to the marine insurance industry. Here are some key terms to know when searching for the right marine insurance:
Blue Water and Brown Water
These are terms usually referred to when dictating the navigational territory that a ship will be covered under. Brown water means that the vessel is covered when in waters within five miles of the coast. Blue water, on the other hand, means that the vessel is covered when in waters over five miles from land. Additionally, brown water is used to describe boats used in inland or coastal waters, while blue water is used to describe ocean-going vessels, which are generally larger and built to endure the open ocean.
This refers to the period that vessels are out of active service or not used for any boating activities. Normally, lay-up periods are added during the winter months. Marine insurance companies usually provide premium discounts for these months. It is important to remember the dates covered during the lay-up period. Using your vessel during these times may mean that you will not have any insurance coverage.
Marine insurance policies outline specific limits to where your boat can operate and still be covered under the insurance. Some policies may only cover a certain distance from land, and others may not provide coverage if the vessel goes outside the state or international lines. Larger navigational limits usually mean higher premiums. If the insurance holder plans to use the boat in international waters, international marine insurance may be required.
International laws place a large burden on shipowners to take care of cleaning up any pollution caused by their ships. The concept of pollution here does not only extend to oil- or liquid-type pollutants. It also covers exhaust gases emitted by the ship’s engine and any trash thrown off the ship.
Pollution liability exposures are a constant reality throughout the marine industry. Still, many policies often offer this as an optional coverage only. If this is included in your policy, it will help you in the event of any contamination of the water, land, or air from oil discharges and other hazardous chemicals.
These terms may be ambiguous to many new boat owners. But knowing them are crucial to getting the best policy available.