Reading your own policy: seven sentences that count

A policy wording runs to forty pages, but the decision after a loss is made in seven places. Once you know them you can judge a contract in ten minutes, your own as well as somebody else’s offer. None of what follows is about any particular product; it is the list of places to look.

First, the insured value. If the document says market value, someone will estimate after the loss what the boat was worth on the day. If it says agreed value, the figure in the contract is the figure. On an eight-year-old boat the gap between those two readings is easily thirty per cent of what you paid.

Second, the navigation limits. They are not a recommendation, they are a boundary, and outside them there is no cover at all. Read them against what you actually do in a season, not against what you did last year, and find out whether a temporary extension is possible and what it costs. A crew that decides in June to carry on past Gibraltar needs to know this in May.

Third, the deductible, and not only the amount but when it applies. Some wordings waive it for total loss and theft, where the sums are largest, and many do not. The sentence that tells you is rarely on the schedule; it is in the wording.

Fourth, gross negligence. Without a waiver of that defence, an ordinary lapse of attention can reduce a payment substantially. Where a waiver exists it usually has a ceiling expressed as a percentage of the sum insured, so the question is not whether it is there but how far it goes.

Fifth, the limits of indemnity, and whether they apply in aggregate or per person and per item. A large number on the front page helps little if the small print halves it for each injured person.

Sixth, the exclusions. In an all risks wording, what is not excluded is covered, which makes the exclusion list the real description of cover. In a named perils wording the opposite holds: only what is listed is insured, and collision and grounding are often missing from the list.

Seventh, the duties imposed on you. What must be reported, secured, maintained, proved? Immobiliser, night berthing, service records, notification of modifications, and the licence required in the waters you use. Those are the sentences where the argument starts after a loss, and they are also the ones nobody reads before one.