Insurance

[John Orentas]

There is another aspect to all this, if you were in the future to make a claim large or small, the insurance company, or more likely the underwriter will make an assesment as wether you are 'fully insured', i.e. wether the insured value is equal to, or excedes the value of your boat.

 

The question of new for old does not come into it. If a decision is made that you are for example 10% under insured the value of any claim will be reduced by that percentage. It is a mistake to imagine that the comany will cover a loss right up to even the low value stated on your proposal. For example a 'total loss' claim based on a replacement cost of the boat would result in a 10% reduction as a result of the difference between the two values, plus a further 10% reduction for being under insured. You will end up with a shortfall of 20%.

 

I have had personal experience of this principle in action, albeit with commercial buildings insurance. It would remain to be seen, that if you were to produce documentation to the effect that you were refused extra cover to reflect the increasing value of your boat, if that would make a difference, from past experience with insurance companies, I for one would doubt it.

 

John Squeers

Edited October 28, 2004 by John Orentas

[Big COL]

Well done, John you have raised a very valid point here and you are absolutely right, but another point to consider is what happens after you have made a stage payment? Because effectively you now own a percentage of the boat, which increases with each stage payment, should you insure this yourself or rely entirely on the boatfitter's insurance? If so would an insurer pay you out if your boat was destroyed due to negligence on the part of the boatfitter. The same applies if the boatfitter goes into liquidation, and you have a half completed boat that you have paid for in stage payments. I may be wrong but I think the boat remains an asset of the company and you join the list of creditors. Therefore should you not insure for this also?

When I took delivery of my sailaway it went into my friend's boatyard. I then insured it for the final estimated cost but I am almost certain that you can be penalised for over insuring. My insurers were made aware of the situation that the boat's value would be increasing almost weekly and were ok with this.

As I am no expert in this field, perhaps someone who is could enlighten us. I seem to remember from Oliver's web site that she did some research into this with her contracts. Perhaps she might know.

Please don't label me a profit of doom and gloom, it's your hard earned cash that I am trying to help protect, a few hundred pounds at the onset could save you thousands in the end. Thankfully I am through all this now and can enjoy the pleasures of boating, still best of luck to you all who are enduring the build - it's worth it in the long run.

[Paul Evans]

I don't think any insurance company would insure against your boat builder going into liquidation. There are just too many unknowns for them to be able to make an assessment of the risks and fix the premium. The answer is to have a contract that requires stage payments after a particular stage has been completed and transfers ownership of the completed work to you. That way, if the builder should go bust, you will at least own the part completed boat and can take it away to another builder. I think this is what Oliver arranged, though I'd have to read her website again to be sure.

[Oliver]

What we arranged through our contract was as follows:

 

We paid £1,000 deposit when we contracted to have the boat built.

We paid nothing further until the steel work was complete, the engine fitted and our surveyor had inspected everything and given the all clear. We then paid 1/3rd of the total build cost and the boat became ours - we reckoned that the cost of the steelwork, the engine and the windows was about 1/3rd of the total build cost so I don't think at that point our builder had much, if any, of our money. If the builder went into liquidation thereafter the boat wasn't his so his creditors couldn't claim it.

 

We didn't pay anything further until the line out (which included our solid wood floor throughout) was completed and our surveyor had approved the further work - then we paid a further 1/3rd. I suppose it is questionable whether the lined out boat was worth 2/3rds of the total cost but we still had a lot of value in the boat and would it have been fair to effectively pay our builder completely in arrear as he was buying kit all the time?

 

We don't pay any more until the boat is finished and our surveyor has given it the final sign off. Originally at that point we were going to pay the balance of the build cost plus any agreed extras, but we have agreed a variation to this. We now pay the balance of the build cost less a sizeable retention. We then have a two week test period after which we pay the retention. We still have all the guarantees and warranties etc which vary in length from 1 to 2 years. Whilst the builder is working on the boat and it is in his care it is covered under his insurance.

 

The contract is based on the Marine Federation standard contract which they say is fair to the builder and the purchaser but when I read it through it seemed to favour the builder too much - so working with our builder we modified it and put in things like how the boat would be valued in the event of forced sale etc. Our aim was to be fair and reasonable to both parties.

 

If anyone would like a copy of the draft we prepared just let me know BUT we are not lawyers and the contract hasn't been tested in a court of law so you're welcome to see it but it would be up to you to satisfy yourself it would work for you and your builder.

 

Now there may be a hiccup in all this. At IWA when I was talking to insurers one of them (who shall remain nameless who gets quite a lot of good press here but who was so patronising and objectionable I will never insure through the company) told us that the provision whereby the boat became ours on the payment was an invalid contract provision and unenforceable - strange that as it was direct lift from the British Marine Federation standard contract.