October 31, 2026

Hull and Machinery Insurance is the most fundamental form of protection a shipowner can have for the physical asset of their vessel. It covers the hull, engines, machinery and equipment of the vessel against damage. As war and associated risks are not included in standard marine insurance, additional insurance can be taken out. This guide will explain the different Hull and Machinery cover available and what it covers. What does Hull and Machinery Insurance cover? A Hull and Machinery Insurance policy will provide cover for physical loss or damage to the vessel. This can vary depending on the clauses selected, however traditionally the Hull would be covered on a named peril basis. Perils covered will typically include: Perils of the sea – Heavy weather and wave damage Collision with other vessels/objects Stranding Fire/Explosion Jettison Natural disaster Machinery damage (subject to certain conditions and often a separate deductible) One key aspect of Hull and Machinery Insurance is that historically only three-fourths of the collision liability will be covered by the Hull and the remaining fourth will be covered by P&I. Some shipowners will take out cover for all four fourths of collision liability via their P&I, but the Hull policy is still important for repairing damage to their own vessel. Why do shipowners need Hull Insurance? The Hull Insurance policy will protect the investment that has been made in the vessel. Without this cover, a single incident such as grounding, engine failure or collision could result in repair costs far exceeding the shipowners operating budget. For container ships, tankers, bulker and car carriers, the premium for marine hull insurance will typically be between 3.4-3.8% of operating expenditure. This is a low cost for such a high risk. Vessel Insurance can help with funding and chartering. Banks and charterers will often request proof of H&M cover. A Shipowners Insurance package including H&M, P&I and War Risk will provide reassurance to the shipowner, lender and charterer that their asset is protected. Different Between Hull and Machinery Insurance coverage options There are several options available to shipowners when taking out Marine Insurance for Ships. The correct option will depend on the value of the vessel, trading pattern, age and risk profile. All Risks or Total Loss Only? All Risks (Full Conditions) – This will provide cover for partial and total losses. This is the most comprehensive option available and is often taken out for modern high value vessels. Partial damage such as bent propeller shafts or holed ballast tanks can be recovered. Total Loss Only (TLO) – This will only provide cover for actual/constructive total losses. Partial damage cannot be recovered. The premium will be cheaper but as most claims are partial losses, including machinery damage which makes up a large percentage of claims, this may not be the best option. This can be suitable for older low value vessels or shipowners who are happy to take on some partial loss risk. Time Policy or Voyage Policy? Time Policy – This is the standard option for hull insurance. It will cover the vessel for a set period of time, usually 12 months. Voyage Policy – This will cover a single voyage. This is more common for cargo insurance. However it can be used for a one off delivery voyage. Agreed Value or Unvalued? Agreed Value – This means the vessel will have a fixed value. If it is a total loss then this agreed amount will be paid. Most Hull and Machinery policies will be valued policies. Unvalued – This means there isn’t a fixed amount. If it is a total loss then it will be based on the market value of the vessel. This is less common for Hull insurance as it can create uncertainty for the shipowner and insurer. Additional Covers to Consider An additional cover can be added to the basic Hull and Machinery policy: Increased Value (IV)/Disbursements – This will provide additional cover, often up to 25%+ of the hull value. This will provide cover for the shipowner outside of the hull policy. In the event of a total loss the shipowner can claim against both policies. Loss of Hire (LOH) – This will pay a daily rate for the loss of earnings following an insured physical damage incident. Usually there will be a deductible period. War Risk H&M – This will provide cover for physical damage caused by warlike operations, mines, missiles and associated perils. These are not covered by standard Hull and Machinery Insurance. Key Exclusions and Limitations in Vessel Insurance It is important to be aware of what is excluded: War and associated perils – Standard Hull and Machinery policies will not cover war, civil unrest, mines, torpedoes or weapons of war. War Risk cover will need to be taken out. Radioactive Contamination and NBC Weapons – Nuclear, chemical, biological and electromagnetic weapons are standard exclusions. Cyber attack is often excluded. Warranties – Class, trading and ice warranties are conditions of the policy. If these are breached it could affect your claim. Deductibles – These will apply to each incident. The higher the deductible the cheaper the premium but the shipowner will have to pay for small claims. Institutional Hull policies will typically have a deductible of around $100,000. Collision and War Risk will have separate deductibles, often lower than the Hull. Constructive Total Loss (CTL) – This occurs when the cost to repair the vessel exceeds the value of the vessel. This will depend on the clauses and relevant law. Factors That Affect Hull and Machinery Insurance Premiums Each vessel will be priced individually by the underwriters. The premium will depend on a number of factors: Age, Type, Flag State, Class & Value – These are key factors. Older vessels will be seen as a higher risk due to mechanical failure. Vessels over 10 years old will often have higher premium increases. Trading Area – One of the biggest factors. A vessel trading in SE Asia or high risk areas will have a different risk