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There is nothing nicer than to refurbish your sailing pride and joy with all kinds of facilities and details. That sometimes other details are lost from sight, is what Mr. and Mrs. Jacobsen experienced.

Ten years ago Mr. and Mrs. Jacobsen bought a used steel cabin sailboat of about 15 meters, with which they hoped to roam Europe’s inland waterways after retirement. The purchase was inexpensive, but in return there was a need for considerable investment to optimize sailing enjoyment. Over the years, for example, the interior paneling was completely replaced at a cost of about € 35,000 and a new Iveco engine with Python Drive was installed at a cost of about € 20,000. For a sum of approximately € 5,000, all the benches in the ship were reupholstered and the curtains replaced. With all the modifications to the ship, the investment amounted to about a ton in a few years. And then the unthinkable happened: while the doors in the front were being varnished, a fire started in the stern. Despite help from everyone in the harbor, it was not possible to prevent the ship from burning out completely.

Jacobsen submitted his claim to his insurer. His yacht was insured for an amount of € 104,000, increased by € 16,000 for the propulsion system. The contents were insured for an amount equivalent to twenty percent of the insured value of the yacht, approximately € 21,000. The surveyor came by and declared the vessel total-loss, after which the insurer paid out € 120,000 for the vessel and an amount of € 3,000 for the contents. This was disappointing for Jacobsen as he had spent a lot of money on the ship and its contents. With regard to the latter the insurer took the position that household effects mean: all household goods that are present in the vessel and are your property. A further explanation stated that it must be the loose items that are in the vessel. This meant that Jacobsen, for example, did not see any return of the € 5,000 he had put into upholstering the sofas. Because these were fixed sofas, they were not part of the contents. The insurer was not to be persuaded and Jacobsen was left with a considerable loss.

Jacobsen’s biggest loss, however, was that he had never adjusted the insured value in his policy and was therefore ‘underinsured’. He might have been able to recover part of his investment because his work had increased the value of the ship, but here too he was denied. The value of the vessel might have increased to € 160,000 over the years, but he was only paid the insured amount of € 120,000. The insurer’s position was entirely consistent with the policy terms; Jacobsen’s investments had literally “gone up in smoke.

TIP: This case concerns the so-called ‘underinsurance’. Underinsurance means that the sum insured is lower than the actual value. You will undoubtedly also make investments in your vessel, not only because of regular maintenance, but also because an engine needs to be replaced or you want to modernize the interior. If these investments lead to an increase in the value of the vessel, make sure that this is recorded and, if necessary, have the vessel revalued. This can be done periodically or after a major modification, such as a new engine. In most cases such a revaluation is free of charge. Another possibility is that you send in the invoices, after which the insurer adjusts the insured value. The small increase in premium does not outweigh the huge financial hangover when the vessel is lost through circumstances. Finally, make sure you have a proper inventory list so that, in the event of a loss, you can easily show the insurer what the contents were.

If there is no total loss but damage amounts to, for example, € 30,000, you will not be paid this € 30,000 but a formula will be applied of (insured value/actual value) x damage = payment. Jacobsen has insured his vessel for € 120.000. The damage amounts to € 30.000. After checking the insured amount, it appears that the actual value is € 160,000. After applying the above formula: (120,000 / 160,000) x 30,000, the damage payment will be € 22,500. Of the damage, € 7500 will therefore remain for the account of the insured. The sum insured was € 40,000 too low so that proportionally less premium was paid.

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