Which Marine Survey Do You Need for Your Boat?

At some point, you’ll need a marine survey. We break down the most common marine surveys.

Most boat owners will require a marine survey at some point, which can be conducted for any number of reasons. You can inspect your boat and do your own survey, but when it comes to insurance or resale, only a professional survey report is acceptable.

Here’s a rundown of the basic types of marine surveys, along with what to expect when the surveyor comes knocking.

Condition and value survey

This is the most comprehensive assessment a vessel will likely receive. A condition and value survey (C&V) provides clients with an informed, professional opinion of a vessel’s condition and fair market value. It includes an in-depth visual inspection of structural integrity, safety equipment, and all other miscellaneous onboard system s (electrical, propulsion, sanitation, potable water, navigation, etc.) as well as an out-of-water hull inspection and test run (aka sea trial).

The written report of a C&V survey provides detailed information on the vessel and contains a list of noted discrepancies or variations from the American Boat and Yacht Council (ABYC) and National Fire Prevention Association (NFPA) standards as well as deviations from U.S.C.G. requirements and prudent seamanship. The report will also contain a “Recommendations” section listing safety, maintenance and repair items that need to be addressed.

Insurance survey

An insurance survey is conducted to assist underwriters in determining a vessel’s condition and insurability for initial policy issuance or renewal. The primary focus of an insurance survey is structural integrity, safety and inspection of system installations as per NFPA and ABYC guidelines. Your safety gear is inspected and noted for compliance with federal requirements, and pertinent identification information is recorded for future reference, valuation, and claims adjustment.

In many cases and depending on the surveyor, the content and scope of a typical insurance survey’s written report is very similar to that of a C&V survey and provides detailed vessel information, discrepancies, and recommendations. The biggest difference is that, in some cases (typically policy renewal for an established client), underwriters will accept an “in-water” survey. Some surveyors see failure to haul and fully inspect the hull and equipment below the waterline as a liability both to them and the best interest of the client. As such, they may decline to conduct a survey (insurance or otherwise) where the vessel is not hauled for inspection.

Appraisal inspection

The appraisal inspection determines the fair market value of a vessel. Instances include: financing, estate settlements, donations, and legal cases (divorce, etc.). As the focus is to simply provide the surveyor’s overall impression of the vessel’s condition, an appraisal inspection is a less in-depth inspection compared to a C&V. The written report will contain basic vessel information, general comments on overall condition and estimated fair market value.

Damage survey

The purpose of a damage survey is to assess the extent of damage to the vessel in the event of an accident. Other items typically included: recommended repairs, estimated repair cost and determining probable cause. Boat owners beware: when you file a damage claim, the surveyor assigned by the underwriter will represent the insurance company’s interest, which may or may not coincide with yours.

Owners have the right to hire their own surveyor to inspect the damage and make recommendations as to repair methods and cost estimates. Depending on the policy, underwriters may even pay for this independent surveyor subject to deductibles and the validity of the claim.

Although we’ve listed the four basic types of surveys and defined the general scope and purpose of each, there is some blurring of the lines separating them. For example, a C&V survey (due to its depth and scope of inspection) can serve double or even triple duty: provide prospective buyers an assessment of a vessel and at the same time, satisfy financial and insurance requirements once the vessel is purchased.

Finding a surveyor

Marine surveys aren’t regulated or licensed by any governmental agency, so it’s important to research potential surveyors. Reputation, word-of-mouth recommendations, and sample survey reports are all part of the selection process. Membership organizations, such as the Society of Accredited Marine Surveyors and the National Association of Marine Surveyors, are also good places to start your search.

Cost and Time

Marine survey prices vary depending on the survey requested, type of vessel, hull material, age, the complexity of the systems, and specific requirements for the survey. Surveys are billed by the job, by the hour or on a per-foot basis. Costs vary greatly, depending on the region.

Shop around to get a feel for the going rate in your area, but don’t base your decision solely on the lowest cost. Final selection should include a review of the surveyor’s experience, references, sample surveys, etc.

The length of a marine survey depends on a number of factors, including the type of survey required and prior preparation. An appraisal survey for a typical 40-foot production yacht may last only a few hours, while a condition and value survey for the same vessel (including haulout and sea trial) could easily take a full day.

By Frank Lanier, Southern Boating February 2019

Buying a boat? Your banker, attorney and insurance agent need you to come fully prepared.

Purchasing a boat is not like buying a car or a house, although it has elements of both. In addition to acquiring an (often) expensive and mobile asset, you’re dipping your toe into admiralty law, which can hearken back to the rules and regulations of a century ago. Being prepared to answer questions in areas of finance, insurance, and legal details could save you time and money, not to mention serious headaches, down the road.

Financing

Boat financing is on the rise from a few years ago as rates have held consistently and are at historic lows. “Instead of paying cash for a depreciating asset, people are taking advantage of higher yields elsewhere,” says Dan Markow, a market executive at Bank of America Merrill Lynch, Palm Beach. “A boat is typically owned for 2-5 years, so it’s better to finance it and hold on to the cash for other uses.”

Boat loans today can be for 10-30 years although most loan periods hover around 10-15 years. Major marine lenders specialize by the size of the loan. Some may work with loans of $25,000 while others, like Merrill Lynch, focus on loans in excess of $3 million. “Larger loans like ours employ creative security-based lending that works more like a revolving line of credit,” adds Markow.

Lenders need to know the age and value of the vessel. Older boats may require larger down payments or higher interest rates. Today’s rates range from 3-5 percent and loans typically require 20 percent down, although this can vary.

Dana Scott, vice president of the Southeast region of the Intercoastal Financial Group, notes that discounts may be available. “You may receive a 1/4 point off special at a boat show or get deals for a higher down payment,” she says. “Those with exceptional credit scores (800+) may receive preferential rates while older boats may have points added.”

The key is to determine if you will be able to sustain the loan long-term with your current and future cash flow. Working with a dedicated marine lender who understands the nuances will provide more options.

Insurance

A yacht needs to be insured whether it is financed or owned outright, and you will want to work with an agent who represents underwriters specialized in marine assets. “There are only about 15-20 major marine carriers available,” says Michael Boyer, marine division leader at Brown & Brown Marine in Fort Lauderdale. “Don’t shop the rates because that won’t yield better results. Instead, work with an agent who has relationships with all the carriers and will be able to compare their rates for you.”

The size, value, and age of the yacht will dictate which underwriter offers full coverage and the lowest premiums. For pre-owned vessels, you will need a current survey attesting to the condition of the boat and its detailed description. Tenders and personal watercraft need to be added to the policy in case they are involved in an accident resulting in property damage or personal injury.

“Insurers will want to know where the vessel will operate, especially in areas that are known for hurricane season,” adds Jeff Specter, vice president of marine insurance at Brown & Brown. “There are endorsements available for certain seasons and geographies.”

If the boat is financed, the lender will need to be added to the policy. Professional crew will also need to be added in compliance with the Federally mandated Jones Act of 1920, which provides a sort of workman’s comp for those serving at sea. The insurance company will want to know if the yacht will be chartered—with or without crew—and that may affect the premiums and the scope of coverage.

Finally, coverage needs to start at the time the vessel is titled to you or your legal entity. If the yacht will be en route from the manufacturer’s factory but is in your possession, you will want it to be insured. One exception may be the availability of cargo insurance that is provided when the vessel is moved via a yacht transport ship. Be sure to ask for details.

Legal Considerations

Legal issues are a combination of the two categories above, and it’s important to complete your due diligence prior to taking possession. Danielle Butler of Luxury Law Group in Florida is very attuned to her clients. “I need to know exactly how they foresee owning, registering and operating their vessel,” she says.

First, Butler counsels her clients against private ownership and instead suggests using a limited liability company (LLC) or a full corporation, both of which protect, if not insulate, against liability. James McKenzie of McKenzie Law in Massachusetts adds that ownership via an LLC may have slight tax advantages over a corporation.

Second, Butler asks whether the vessel will have U.S. or foreign registry, such as in the Cayman, Marshall or British Virgin Islands. In order for the boat to be registered or “documented” in the U.S., the entity in possession must be at least 75 percent U.S. owned. Butler also needs to know where the vessel will operate primarily, if it is foreign-built and if it will be professionally crewed, since foreign registries have different rules depending on the answers. Even details such as whether you will finance the boat or purchase it with cash may impact your registration options.

A title search for liens is a must for any vessel, especially one that will be documented in the U.S. A lien is a debt that follows the vessel, not the owner, so you’ll want to discover if the vessel has any issues with outstanding payments to a yard or crew. You can do the search yourself directly with the U.S. Coast Guard, or rely on the expertise of dedicated agencies that provide this service for a nominal fee. In the process, you will also learn if there are any lawsuits against the vessel.

Almost all transactions are made with an offer contingent on the completion of a satisfactory survey. McKenzie warns that in addition to the hull, the engines should have a separate survey focusing on things like compression metrics and oil analysis to avoid costly repairs later. “Check with the manufacturer about any recalls on both new and used boats before you sign on the line,” he adds.

There are a lot of variables that go into yacht ownership, and there are as many different circumstances as there are potential owners. “There’s no canned answer,” says Butler. “If in doubt, get specifically qualified counsel because maritime law is its own beast.”

You may already have relationships with a banker, an attorney and an insurance agent for other assets you own, but consider a marine specialist in each of the above categories, especially if the vessel you are purchasing is expensive, will be chartered or is pre-owned. Referrals from other boat owners or from your broker are best. Once armed with the answers to these questions, you’ll be more than halfway to enjoying the best of boating.

By Zuzana Prochazk, Southern Boating Magazine January 2017

Tag: insurance