Charter: Insuring a security deposit: an overview of different models

Let's start with a trend that is making bonding insurance increasingly popular: bonding amounts have been rising steadily for years. There are many reasons for this: chartered ships are getting bigger and bigger, are equipped with more and more expensive technology and the proportion of catamarans on the market is also growing steadily. They are almost twice as expensive as monohulls of the same size.

You can find more articles on this topic in our charter special:

• Charter contract: small print with fatal consequences
• Check-in: Important tips for taking over a charter yacht

Ever higher deposit amounts

This has consequences for the customer: Larger ships are more expensive for fleet operators to insure, as are catamarans, and the excess for hull insurance is rising accordingly. However, as crews have tended to be less experienced and skilled in handling yachts for years, damage is becoming more frequent - and more expensive. For a three-cabin vessel in the Mediterranean, this can quickly amount to 3000 to 3500 euros, for large yachts or catamarans even 4000-5000 euros. In the Caribbean or other overseas territories, it can easily be 6000 to 9000 euros. Deposits vary greatly from area to area, boat type, size and provider. Demanding areas with a higher probability of damage, such as Sardinia and Corsica, or a generally higher risk, such as the hurricane season in the Caribbean, drive up prices. This makes it difficult for customers to maintain an overview.

Watch out, trap! Deductible higher than deposit?

The deposit usually corresponds to the excess of the hull insurance of the charter yacht. At least that's how it should be. However, there are also black sheep in the market whose charter contracts sometimes contain a passage that reads something like this: "The deposit paid may differ from the excess of the hull insurance". If this is the case, you should be wary, as this can entail incalculable financial risks in the event of a claim.

Play it safe: insure your deposit

But back to the standard bareboat customer. "80 per cent of our customers now take out deposit insurance because the risk is too high for them," says Max Barbera from the German charter agency Barbera Yachting. But that's not the only reason. "Many also want the check-in and check-out to be stress-free, and the insurance protects them from lengthy discussions with the base staff when returning the boat in the event of damage." Incidentally, charter agencies are a good point of contact when it comes to deposit amounts and deposit settlements. They know the average in very specific areas and also know the outliers at the top.

There are two ways of minimising the risk: firstly, bonding insurance, which is offered by insurance brokers such as Pantaenius, Yacht-Pool, Hamburger Yachtversicherung and others. However, fleet operators have also long since discovered the risk business for themselves. As an alternative, they usually offer so-called "security deposit settlements". However, the two systems have fundamental differences. With deposit insurance, you pay the fee, but still leave the full amount of the fleet operator's deposit at the base on site. If there is damage caused by your own fault, you contact the insurer after settling the account with the charter company and are reimbursed the amount more or less promptly after returning from the trip. Usually less an excess of around five per cent of the deposit amount. But of course the money is first deducted from the credit card account in the event of damage. Not every skipper wants this - or can afford it.

Securing a security deposit: insurance versus compensation

The cost of the insurance solution depends on the amount of the deposit. It is worth comparing. With some insurance policies, a deposit of 3,500 euros puts you in the cheaper class, with others in the next most expensive class. Most insurance policies only cover one trip, but there are also policies that are valid for a calendar year, regardless of how many trips the skipper sails - if the deposit is not higher.

The fleet operator model is different, sometimes also referred to as deposit compensation. Here, the customer pays a fee depending on the amount of the deposit, but then has to pay no or only a significantly reduced deposit at the base. This is usually somewhere between 200 and 500 euros. However, there are also providers who demand a relatively high deposit of up to 1000 euros. The amount of the one-off fee is calculated either as a lump sum according to the amount of the deposit or according to daily rates for the duration of the trip, usually an amount between 50 and 70 euros. This can lead to longer trips being disproportionately more expensive than one-week trips.

For long trips, daily rate compensation is usually more expensive than the insurance

An example: If you charter a Sunsail yacht with four cabins in Italy, you would have to pay a deposit of 4475 euros without insurance. If the planned trip lasts 14 days, a deposit of 980 euros would have to be paid at 70 euros per day. In addition, a residual deposit of 1000 euros would have to be paid. In the worst case scenario, almost 2000 euros would be lost in the event of damage. If you insure the same deposit with independent providers, it usually costs just under 300 euros and their deductibles are significantly lower. It is often around five to seven per cent of the excess, or even lower, as Dirk Amann, charter specialist from insurer Pantaenius, explains. "Our model is very simple: the contract specifies an excess of 100 euros. If the damage is less than this, the customer pays it themselves; from 101 euros, the insurance then covers the full amount". Another important detail: no distinction is made as to whether the deposit was rightly or wrongly withheld. If the customer falls foul of a black sheep in the industry who wants to pass on damage due to negligent maintenance to the customer, for example, the insurance will still pay out. Most insurers take this approach.

To be fair, of course, it has to be said that there are also significantly cheaper solutions from fleet operators. Take Pitter Yachting, for example. "With us, the customer pays a flat rate of 250 euros, no matter how long the trip lasts. They then don't have to pay the deposit and, in the event of damage, don't have to worry about reporting it to the insurance company with a progress report and photos," says Klaus Pitter.

Attention GTC: Some damages are not covered!

What is somewhat surprising is that in some areas, such as Italy, the general terms and conditions of the bonding insurance state that grounding is excluded from the bonding settlement. If there is a major claim, the full excess of the hull insurance is due. Klaus Pitter explains the reasons for this as follows: "Our bonding compensation is intended for normal everyday charter damage: a scrape or bent railing support on an unsuccessful mooring and the like. Capital damage, when the boat hits a rock at four or five knots under autopilot, that's something else. This year, for example, we had five major mast damages because crews sailed through the Zdralec Passage in Croatia despite warnings and briefings from the base and hit the bridge with the mast." They are therefore currently considering introducing a similar regulation to the groundings in Sardinia for Croatia in 2026. So that the deposit compensation can remain favourable for the majority of customers.

The example is understandable, but also puts its finger right in the wound of some fleet operator solutions: There are many similar exclusions, and those who don't bother to check can be in for nasty surprises. One company takes the dinghy out of the security deposit, the next clogged faeces tanks. The customer must inform himself in order to be able to assess his residual risk. Other fleet operators, such as Navigare Yachting, have started to integrate security deposits into their mandatory charter costs, which the customer practically buys when booking. But even here there are exceptions, such as for blocked holding tanks or lost equipment.

Meanwhile, even online charter agencies, such as Click & Boat, are beginning to offer their own deposit insurance policies, which they have taken out with reinsurers. Until now, charter agencies have tended to refer to independent insurers or fleet solutions. Here, too, there is a fairly high excess (20 per cent of the claim amount) and exclusions such as dinghies, outboards and so on. The bottom line for the skipper is to remain vigilant. If he chooses the fleet variant with no deposit at all or a greatly reduced deposit, because the deposit amount should not be deducted from the account in the worst-case scenario, he needs to look for exclusions of liability. If you simply don't want to do this and are in financial need, the insurance solution is often the more attractive option.

What you should look out for: 6 tips on deposit insurance

1. Even if the charter company's offer seems tempting, it is almost always worth comparing prices. Insurance brokers often have more favourable policies.
2. With fleet provider models where a daily rate is paid, trips lasting several weeks can be more expensive than flat-rate insurance.
3. If the reduced deposit is still over 500 euros despite the fee, the free providers are almost always the better choice.
4. In any case, you should check the general terms and conditions for exclusions of liability. Dinghies, movable equipment and major damage such as grounding are often excluded from the insurance or the deposit.
5. Damage caused by negligence on the part of the crew, such as blocked sewage tanks or heavily soiled boats or boats that have not been fully fuelled, often lead to deductions from the deposit when the boat is returned. These are not always covered by the insurance.
6. Many insurers and fleet operators do not cover the risk of a fun regatta, or only do so on request. And even then usually only in conjunction with an increased fee.

A price example of free insurances

One-week trip to Sardinia on a 42-foot yacht, 3500 Euro deposit.

• Pantaenius 303.72 euros. Valid for one trip, 100 euro excess.
• Yacht-Pool 333,20 Euro. Valid for a whole year, even for several charter trips. Five per cent of the deposit amount remains as an excess, in our case 175 euros.
• Hamburg yacht insurance: 345 euros. Cover for the dinghy, SUP's, surfboards costs 20 euros extra. (Deposit up to 4000 Euro) Deductible of the hull must not be higher than the deposit. Valid for one trip.