Determining the value of the marina’s structures, components and mooring system is an important consideration, if not the most important consideration when determining how much insurance to purchase. Unfortunately, there is not a one-size-fits-all formula that can be used to accurately determine value. All marina facilities are different, and each marina is usually not uniform. For example, most marinas have varying combinations of structures, such as open and covered slips in different lengths and ages.
Using the wrong value has several obvious implications. If too high of a value is used, then the marina owner will correspondingly be paying policy premiums in excess of what is needed. Conversely, if too low a value is used, then insurance proceeds will potentially not be sufficient to cover a damage claim. The issues can be magnified when dealing with coinsurance and separate per-dock policy limits.
Coinsurance, which is often a component in marine policies, requires the owner to be responsible for a portion of a claim. For example, a $500,000 dock policy may require an owner to be responsible for 10% of any claim. Assuming the marina had $300,000 worth of damage from a storm, the owner would be responsible for $30,000, and would receive proceeds from the insurer of $270,000 (without taking into account depreciation and/or any deductible). However, if the marina owner undervalued its docks, and the docks were actually valued at $700,000 (not $550,000) then there would be additional penalties. Instead of just being responsible for 10% for coinsurance, the dock owner would be responsible for the prorate shortfall. Instead of receiving $270,000, the marina owner would receive less than $240,000 (again not including depreciation and/or any deductible). So even in instances where the limits are sufficient to cover the loss, the amount paid by the insurer will be reduced if the valuation was too low.
Similar to coinsurance penalties, marina owners also sometimes have reduced payouts for claims when policies include a per-dock limit. For example, a marina may have $5.0 million in total coverage, but each dock has its own limit. Unless each dock has an accurate valuation, the marina owner can have problems if there is a claim. Again, some docks may be over insured and others may under-insured, which can trigger coinsurance penalties. Marina owners should be on the lookout if their policies have limits applicable to each dock, and it should be a red flag if the same values are used for multiple docks, but the docks are not the same or very similar configurations.