A big slice of a vessel operator's expense pie usually goes for insurance. In many cases insurance is a vessel owner's third or fourth largest expense. An important way for vessel owners to cut insurance costs is to increase their deductibles.
Commercial hull insurance coverage includes something called the "running down clause." Also referred to as the "collision liability clause," it dates back to an 1836 British court case.
Usually we think that a collision with another vessel would only cover your own vessel's hull damage. However, under the collision liability clause, damage to your vessel and to the hull and cargo of the vessel you collided with are both covered.
Let's say your hull is insured for $750,000 and a collision caused $900,000 damage to the other vessel and its cargo. The hull insurance deductible would be 2 percent, or $15,000. This means we'd have $750,000 available to each vessel after paying a deductible of $15,000. Unless you have excess collision insurance, you'd have to pay two $15,000 deductibles - one for the first $750,000 (in this example) and the second to get you $150,000 in additional Protection & Indemnity (P&I) coverage needed to reach the $900,000 in damage suffered by the other vessel.
There is an easy solution. Ask your insurance agent to quote excess collision insurance that raises your collision liability limit to match your P&I limit of protection. This eliminates a payment - in this case a $15,000 deductible - because your P&I insurance wasn't used.
Keep in mind that some of the modern P&I policies exclude collision with another vessel so it's very important to look into excess collision liability coverage. Excess collision coverage is usually very affordable, especially if you compare it to paying two deductibles.
There's another easy way to save on deductible expenses. P&I deductibles are usually equal to the hull deductible (which is usually 2 to 5 percent of the hull value). Many insurers only show one deductible for all P&I claims. Request a property damage deductible equal to your hull deductible but request a bodily injury deductible of between $250 and $1,000.
This not only saves you money, but is also readily accepted by the insurer because bodily injury claims can be handled more quickly.
