Renewal price going up on your boat: how adjustment clauses work

A higher renewal price going up on your boat usually shows up with the invoice, not when you read the policy. In most European hull and liability contracts it is only possible because the wording contains an adjustment clause, and how adjustment clauses work is worth five minutes before the deadline runs. A well drafted clause follows fixed rules, works in both directions and gives you a right to cancel when the price rises. This article explains what to look for in the contract; it says nothing about any particular renewal.

For hull cover, one German wording, for example, allows the insurer to recalculate every year and obliges it to do so every few years. The calculation is made for groups of similar risks, not for your single boat, and it may only reflect changes since the last calculation, sometimes with an inflation index added. Personal loadings and discounts stay as they are. A good clause also says that a temporary change, such as one exceptional storm season, is no reason to adjust. Check whether your wording says the same, and whether it names the index.

The second thing to find in the wording is the threshold. Some German contracts adjust only when the recalculated figure moves by at least 5 percent, and then they allow an increase but require a decrease. Some add a cap that protects existing customers: they never pay more than a new customer pays for the same cover and the same risk features. The new price normally applies from the next policy year, and an increase must be announced in writing well before it takes effect, together with an explanation of your right to cancel.

Liability cover is often adjusted differently, and the difference matters after a loss as much as before. In German liability wordings an independent trustee calculates each year how the average claim cost across all liability insurers has changed, rounds it down to a multiple of five and publishes the percentage. Below five percent nothing changes, but the movement is carried into later years. If the figure falls, the price has to fall. Look in the policy for this mechanism, because a clause that lets the insurer set the percentage alone gives you far less protection.

When the price rises and the cover stays the same, German law (section 40 of the Insurance Contract Act, VVG) gives the policyholder one month from receiving the notice to cancel, with effect at the earliest from the date the increase would apply. Insurance tax is a separate matter: a higher tax rate usually gives no right to cancel. A changed no claims discount after a claim, or a change you asked for, such as declaring a new engine, is not an adjustment either. These follow other clauses with other consequences.

Some contracts include the opposite mechanism, often called a benefit guarantee or innovation clause: if the insurer improves the wording for new customers without charging more, the improvement applies to existing contracts straight away. Whether you have one is a question for the schedule and the general terms. Ask your broker or insurer which version of the wording applies to your contract today, and whether later improvements reach you automatically or only after you switch to a new version.

The type of boat makes no difference to these clauses. They sit in the general part of the contract, so the same rules apply to a sailing yacht, a motor boat, a catamaran, a houseboat or a jet ski. Differences only come from the risk group in which a contract is calculated. In practice, when a renewal notice arrives, check whether it is an adjustment or another change, work out the percentage and decide with a calendar in hand, because the one month deadline runs from the day the letter reaches you.