Huge technological advancements in the safety measures have increased the maritime operations at both national and international levels. Though the marine vessels have become extremely durable and weather-resistant, the unpredictable nature of the oceans cannot be undermined. The damage due to collisions, terrorism, piracy, and other events can cause a huge loss to the shipper/ship owner. To prevent these losses, insurance companies have introduced the hull and machinery insurance popularly referred to as H&M insurance policy in the market.
What is Hull & Machinery Insurance?
Hull and machinery insurance commonly known as hull insurance provides a safety net to the shippers by insuring the vessel and its equipment/machinery from a wide range of perils. Hull insurance covers different types of marine vessels like tugboats, oil rigs, barges, ships, and other vessels that operate in various types of waterways. The marine hull insurance can be taken for covering a single vessel or the entire fleet of the shipper. It usually covers the perils related to the sea. Yet, other perils can also be included in the hull marine insurance coverage to get protection from other natural disasters and perils.
Why is hull insurance needed?
Though marine technology has evolved consistently over the last few decades, it is still difficult to manage the uncertainties associated with sea voyages. The costs for repairing the vessels and machinery have also increased at an alarming rate. Any kind of damage to the vessel or its equipment can incur a huge financial loss to the shipowner. To protect them from the losses caused due to storms, hurricanes, tsunamis, collisions, accidents, terrorism, thefts, and other disasters, insurers offer a comprehensive hull machinery insurance policy.
Trading via waterways has increased at a rapid pace. Merchant fleets have increased to such an extent that ship accidents are no longer a rare phenomenon. To counter the risks associated with long trade routes, merchants have started insuring their vessels and equipment. It also makes sense to avail the hull insurance policy as it covers salvage, general average, and other events that cause partial or total damage to the vessels.
Key Features Of Hull & Machinery Insurance
- Comprehensive coverage: A marine hull insurance policy protects you from the financial losses caused due to a wide range of perils such as explosion, fire, robbery, collisions, and other risks. Events like ship sinks and acts of god can also be included in a comprehensive hull insurance policy. All the oceanic vessels, inland and coastal vessels, port craft, and related machinery can be included in the policy coverage.
- Cover for labour wages: The damage can put a halt to the regular operations of the vessel. To bear with the labour wages during such circumstances, you can get hull insurance with cover for labour wages. The policy also includes the legal expenses required to defend the collision liability. Usually, the insurer pays 75% of the collision liability if the policyholder suffers a loss.
- Extensions are available: Extensions to cover the business interruptions, third-party liability, and terrorism activities can also be availed to extend the scope of this policy.
- Flexible policy: You can get a hull and machinery insurance either for a single trip or extend the coverage for the entire year by availing the annual policy. The sum insured for the policy will be approximately equal to the vessel’s cost as agreed upon by the insurer and insured.
Characteristics of Hull & Machinery Insurance
- Salvage law and charges: Salvage refers to the act of saving a marine vessel, equipment/machinery or its contents from damage. The salvor is the person who claims to be the saviour of the ship or its contents. He needs to be compensated by ship owner and cargo owners. Salvage charges are the charges paid to the salvor by the cargo owners and ship owners. The law of salvage is different for different countries. A hull machinery insurance policy usually covers salvage and salvage charges.
- Collision liability: If your vessel collides with another vessel and causes an accident damaging the vessel or its cargo, the owner of the other ship can file a lawsuit against you. The hull and machinery insurance includes collision liability cover to protect your financial interests from collision liability.
- Hull insurance premium: The factors like depth of the port, vessel’s build quality, and tide protection and other safety measures implemented at your port determine the hull and machinery insurance premium calculation. The premium will be relatively lower if the construction quality of your ship is good. Ensure that all the safety measures are being taken at your port to minimise the insurance premium.
- Total damage cover: If the vessel gets completely destroyed due to a collision or any other named peril, the insurer provides additional cover to the policyholder. In this case, you may receive a 20% or 25% additional coverage than the vessel’s insured value. This additional coverage is provided to compensate for all the losses incurred due to the damage.
Types of Hull & Machinery Insurance
- Hull insurance: This type of hull machinery insurance policy covers the hull and torso of the vessel along with furniture and fixtures installed permanently in it.
- Machinery insurance: The required equipment or machinery to navigate the vessel through the inland waterways and ocean can be insured by availing a machinery insurance policy.
- Single vessel policy: If you want to insure only a single vessel from the mishaps, get a single vessel policy. It is perfect for shippers who own a single ship or one ship in multiple fleets.
- Fleet policy: If you own multiple ships or a fleet, get the fleet policy to cover the entire fleet of ships.
Hull & Machinery Insurance Plans Available in India
The popular hull and machinery insurance in India are highlighted below:
| Policy Name | Sum Insured | Policy Tenure | Key Features |
|---|---|---|---|
| Marine Hull and Machinery Insurance by Hitech Group | As per the coverage requirements, number of vessels insured, and add-ons opted by the policyholder | Depends on the policy type and requirements | Includes protection and indemnity liabilities. General average disbursement is included in the coverage. Additional risks like fire, collision, explosion, salvage charges, etc. are included in the policy coverage. |
| Marine Hull and Machinery Insurance by IFFCO Tokio | As per the coverage requirements, number of vessels insured, and add-ons opted by the policyholder | Depends on the policy type and requirements | Covers hull, machinery, and equipment installed in the ship. Collision liability cover is included. General average, salvage charges, ship owner’s liability, and other expenses are covered in this hull insurance policy. |
| Marine Hull Insurance by United India Insurance Company Limited | As per the coverage requirements, number of vessels insured, and add-ons opted by the policyholder | Depends on the policy type and requirements | Fishing vessels, sailing vessels, ocean going vessels, etc. can be covered in this hull insurance. Salvage charges, general average, and damages due to fire, collision, ship sinks, and other events are included in the policy coverage. Ship owners and bankers of ships and vessels can avail this policy. |
| Marine Hull and Machinery Insurance Policy by HDFC ERGO | As per the coverage requirements, number of vessels insured, and add-ons opted by the policyholder | Depends on the policy type and requirements | Damages caused by war, civil commotion, strikers, and other risks that are usually excluded in the regular hull insurance policy are covered under this policy. Sue and labour costs, wreck removal charges, and other coverages are available in this plan. The perils covered by hull and machinery insurance include perils of the seas and other water bodies including acts of god are covered in this marine hull and machinery insurance policy. |
| Hull and Machinery Insurance by Prudent | As per the coverage requirements, number of vessels insured, and add-ons opted by the policyholder | Depends on the policy type and requirements | Global claims network support is provided to the policyholder. Hull and war coverage includes the risks like terrorism and piracy. Customisable policy and includes total loss cover. |
Inclusions & Exclusions of Hull & Machinery Insurance
What’s covered?
- The damages caused to the hull or vessel during the inland transit or international voyages can be covered under this policy.
- The machinery or equipment of the ship along with its permanently installed furniture and fixtures are covered under hull insurance.
- The damages caused due to earthquake, lightning, volcanic eruption, tsunami, and other natural calamities are covered under the marine hull insurance policy.
- The losses or damages caused due to ship sinks, collisions, accidents, or overturning of the vessel are covered in this policy.
- A hull and machinery insurance policy includes a third-party liability cover. It means that if your ship causes damage to other vessels during voyages, the hull machinery insurance policy will cover the financial liabilities associated with it. The third-party liability also includes the bodily injuries inflicted to a third-party during the accident.
- If the vessel gets damaged during the maintenance works, the repair works can be covered under this policy.
What’s not covered?
- Any form of intentional damage caused to the machinery or vessel is not covered under this policy.
- The damages caused due to gradual wear and tear of the hull and machinery is also not included in the hull and machinery insurance cover.
- The damages caused due to nuclear wastes or radioactive contaminations are also excluded from this policy.
- If the losses or damages are caused due to overloading goods in the ship, then they are not included in the policy coverage.
- If the vessel gets damaged due to terrorism activities, it is generally excluded from the policy coverage.
- If the damages are inflicted by the crew members under the influence of alcohol, the losses are excluded from the hull insurance.
- The damages caused due to sailing in the storm even after a warming was issued prior sailing are not covered under this policy.
Who needs hull insurance?
Ship owners who own a single ship or fleet of ships need to take a hull insurance policy. All types of oceanic and inland water vessels can be protected under this policy. Some of the vessels that can be protected by marine hull insurance include:
- Boats
- Ships
- Yachts
- Cruises
- Fishing boats
- Bulk carriers
- Pontoons
- Jetties
- Wharfs
- Other types of pleasure boats
Shipping companies, oil exploration operators, owners of water sports companies, ship operators, and other types of oceanic vessel owners can also get this insurance to prevent the financial losses due to the ship damages.
Things to consider before getting hull and machinery insurance
- Age of the vessel: The insurer will charge a higher premium if the vessel is old or in dilapidated condition. Therefore, the vessel must be insured as soon as you buy it.
- Get enough coverage: The coverage must be sufficient enough to cover the losses even if the vessel gets completely damaged after an event. If the existing policy does not cover all the risks, you may get an additional cover to protect the losses. For example, the damages due to terrorism, debris removal cover, and other add-ons can be added with the primary policy to extend its benefits.
- Calculate the premium: The hull and machinery insurance cost is calculated after considering the factors like vessel type, vessel’s age, trading limit, port condition, port depth, and more. If the cost of the vessel is higher or the ship condition is not too good, the insurer will ask for a higher premium. The premium cost can be reduced by opting for a higher deductible. The hull and machinery premium calculation can be done by using a premium calculator provided on the insurer’s official website or app.
- Easy claim process: The claim process provided the insurer should be quick and hassle-free. It will help you to file a claim request without any delays.
How to claim hull and machinery insurance?
The following steps can be followed to claim hull and machinery insurance:
Step 1: Notify the insurer
You must inform the insurer about the damage or losses immediately after their occurrence. The insurer will guide you about the claim procedure and registration process. The nature of the loss or damage along with your policy details need to be provided to the insurer. After that, you can fill the claim form with all the details. Now, submit the form along with the evidence details and documents that can verify the legitimacy of your claim.
Step 2: Get the vessel surveyed
After registering your claim, the insurer will appoint a surveyor to inspect the damages. The vessel, hull, and machinery damages will be inspected by the surveyor. All the details related to the damage should be provided to the surveyor so that he can create a detailed survey report. The survey report will contain the details of the compensation amount that you are liable to receive once the claim is settled by the insurer.
Step 3: Wait for the procedure to be completed
The nature of the hull and machinery insurance claim is such that it may take many days or even weeks to be processed. The process is long and tiring especially when there is a confusion regarding the collision liability. As a result, you need to be patient till the entire procedure gets completed. Also, cooperate fully with the insurer during this process and provide them with all the documents they require to settle the claim successfully.
Documents required to verify the claim
- A duly filled and signed claim application form
- Policy documents that you received at the time of policy issuance
- Repair invoices (if any)
- FIR copy (in case the damages were caused due to thefts or piracy)
- Photographs of the damage and incident
- A detailed survey report
- Logbook of the deck and engine room
- Any case related documents asked by the insurer