“There’s an old saying in insurance: ‘If you have the goosethat lays the golden eggs, do you insure the goose or the eggs?’” says CliveEvans, founder of Yachting Financial Solutions. “Everybody insures theirpossessions. Very few of us insure ourselves.”
Point made. Especially in yachting, where many don’t setaside money as savings, let alone spend it on something they won’t see a returnon, says Evans, who calls life insurance for yachties a minefield. He’s notwrong — the unique lifestyle of yachting and the risk of investing in theinevitable and unknowable certainly makes life insurance a ground most crewdon’t want to tread on. In order to make navigating the minefield that much easier,behold four things you should know about life insurance.
1. Your yachtprobably won’t cover you — at least not enough.
While life insurance is available and many yachts purchaseit, life insurance isn’t a standard part of a yacht benefit package, saysClayton Swart of MHG Insurance. And if it is available? Swart saysemployer-sponsored life insurance coverage is typically not sufficient.
“The life insurance policy limits I’ve frequently seenchosen by employers are usually fairly inadequate, ranging from $10,000 to$25,000,” agrees Maria Karlsson of Superyacht Insurance Group. “Higher limitsare available, but are more expensive and therefore not as usual.”
She adds that it’s more customary for yachts to includeAccidental Death and Dismemberment coverage as part of the insurance package,which is a form of life insurance that covers crew should they die from anaccident (death from illness doesn’t qualify).
Some international crew medical carriers also offer lifeinsurance as an optional benefit to add-on for an extra premium, Karlsson says.
2. But that may notmatter — if you’re young and single.
“If you are a single guy or girl, what do you care aboutlife insurance?” says Evans. “If you have dependents, it’s a no brainer.”
Dependents can include your spouse, children, and parentswho would be negatively affected by your death. “Having life insurance providespeace of mind to anyone who would otherwise be relying on the crewmember’sincome to maintain their standard of living,” Swart says, adding that somepolicies will even payout prior to death if a terminal illness or injury hasbeen diagnosed.
In addition to life insurance serving as a financial vehicleto aid and protect a crewmember’s family in the event of a passing, it’s alsoexcellent to utilize if you own property with a mortgage or have large,outstanding consumer debts and other bills, says Karlsson.
“In particular, captains and senior crewmembers who areolder and have families, fall within the category where life insurance isnecessary and beneficial,” she says.
3. But if you fallwithin that category, you should probably get an individual plan.
Karlsson and Swart both stress the importance of having apersonal policy to supplement employer-sponsored coverage, especially as youget older, according to Swart.
“Multiple life insurance policies can be in force at thesame time on a given person,” says Swart. “Usually there will be a limit,however, on just how much life insurance one person can have in place(typically based on their age, income, and assets).”
Having your own policy is also beneficial if you’re to leaveunemployment. Karlsson believes the best package is one that covers you whileworking, in the event of accidents, injuries, or a serious illness (all ofwhich can happen to young crew!), and during time off or leaving ship.
“The employer may offer life insurance as a group plan, orthey may offer only captains’ and senior crewmembers’ individual life insuranceplans as part of their benefit package and they will pay the premium as long as[the crewmember] stays in the employment,” she says. “I believe having your ownindividual policy is the best solution, since the plan will not terminate whenthe employment is up. Let’s be honest, the yachting industry is very transientby nature, and crew cannot rely on the employer-sponsored group insurancepackage indefinitely.”
4. There aredifferent types of life insurance.
Make sure you’re not shopping for the wrong package. Thetypes of life insurance include:
Term insurance, whichcovers you for a specific period. According to Evans, if you die within thatperiod, the insurer pays out, and if you don’t, the insurer keeps your moneywhen the term is up. If you cancel before you die, you don’t get any moneyback.
Karlsson compares it to “renting” versus buying, becauseit’s a pure death benefit with no investment value that’s primarily used toprovide income replacement and financial responsibilities coverage. She callsit an affordable and simple solution for crew to provide family coverage of themost important debts, such as mortgages or children’s education, adding, “Itprovides peace of mind without breaking the bank!”
Whole-of-lifeinsurance, in which the cover runs out when you die and the insurer paysout. While this is more expensive in terms of premiums (which you continue topay until you die), you are guaranteed a payout, says Evans. If you cancel itbefore you die, you get your money back. He notes this is basically the same asuniversal life insurance, which is amore U.S.-centric term, but that individual products might differ in detail, somake sure you know what you’re buying.
5. You’ll need to beunderwritten properly.
When it comes down to it, says Evans, it’s difficult tounderwrite proper yachtie-appropriate life insurance. “What is a yachtie? Thejob is very diverse. It’s not the same as insuring someone with an office jobon shore,” he says. “Underwriters have to factor in a whole range of criteriaand factors that they wouldn’t for someone outside yachting. The perceivedrisks are higher; the coverage has to be global. That means it’s going to costmore.”
According to Evans, if you’re going to insure your life, ithas to be for at least $250,000. A good life insurance product for a 35 year oldat sea is going to cost $200 or $300 a month, which Evans also points out isthe same person struggling about whether to save $1,000 every month.
So yes, it’s going to cost you, but it’s worth the cost.
“If you go and buy some cheap life insurance, it isn’t goingto cover you while you’re at sea in an Atlantic gale,” says Evans. “You need tohave life insurance that covers you wherever you are, doing whatever your jobentails.”
Swart adds that it’s also very important for crew to makesure the carrier is willing to offer coverage to someone who works in yachtingand that the policy will pay if the crewmember dies outside their home country,which is a common limitation.
When researching a policy, Karlsson recommends consideringyour financial needs, the type of policy, policy amount needed, and carrier orunderwriter. Always consult with a professional for your options and talk to anaccountant or financial planner before making any decisions.