A vessel is one of the most complex and capital-intensive assets a business can own — exposed to perils that are uniquely severe: storms at sea, fire, explosion, piracy, collision, grounding, and mechanical breakdown far from any port. Hull & Machinery Insurance is the specialist marine policy that covers the vessel itself (the hull, machinery, and equipment) against these perils, providing financial protection for ship owners, bareboat charterers, and operators of ocean-going, coastal, and inland vessels against the full range of marine risks.
Marine Insurance · ITC Hulls · Ocean-Going · Coastal · Inland Waterways · Named Vessel Basis · Agreed Value
Hull & Machinery (H&M) Insurance is the specialist marine insurance policy that covers the physical vessel — the hull, machinery, equipment, and furniture — against loss or damage from the perils of the sea and other marine risks. It is the marine insurance equivalent of motor own-damage insurance: just as motor insurance covers a vehicle against accident and damage, H&M insurance covers a ship or vessel against the full range of marine perils. The policy is placed on a named vessel basis (each vessel identified by name, type, flag, IMO number, and gross tonnage) and on an agreed value basis (the insured value is agreed at inception and is the basis of settlement for total loss). Hull & Machinery insurance is governed in India and internationally by the Institute Time Clauses — Hulls (ITC Hulls 1/11/95), the standard internationally recognised marine hull policy conditions.
Full settlement at the agreed insured value if the vessel is totally lost (sinks, is destroyed beyond recovery) or is a constructive total loss (cost to repair exceeds the repaired value). Agreed value eliminates post-loss disputes about vessel market value.
TOTAL LOSSCoverage for accidental physical loss or damage caused by the sea's actions — storms, heavy weather, flooding, grounding, striking a submerged wreck or reef, and other fortuitous marine perils that are the primary cause of vessel losses worldwide.
MARINE PERILSCoverage for accidental damage to the vessel's main propulsion machinery, auxiliary engines, boilers, and mechanical systems — including latent defect in machinery leading to sudden breakdown — a critical cover for aging fleets.
MACHINERYThe Running Down Clause (RDC) covers 3/4 of the owner's legal liability for damage caused to another vessel in a collision. This is one of the most critical H&M covers — a single collision can generate third-party claims far exceeding the vessel's own repair cost.
3/4 RDCGoverned by the internationally recognised Institute Time Clauses — Hulls (ITC Hulls 1/11/95), the policy is placed on an agreed value basis — the sum insured is agreed at inception and is the settlement basis for total loss, without post-loss market valuation disputes.
ITC HULLSCovers reasonable expenses incurred by the owner to prevent or minimise a loss covered under the policy — e.g., salvage costs, emergency repairs to keep a damaged vessel afloat, towing to port. Sue & Labour costs are in addition to (not within) the sum insured.
SUE & LABOURComprehensive Coverage — Perils, Losses & Liabilities Covered Under H&M Insurance
Under ITC Hulls (Institute Time Clauses — Hulls 1/11/95), Hull & Machinery Insurance provides broad coverage for physical damage, total loss, and collision liability. The key covered perils and losses are described below.
The primary insured peril in all hull insurance. “Perils of the seas” means fortuitous accidents or casualties of the sea — it does not include the ordinary action of wind and waves or natural wear. Key perils covered:
• Heavy weather damage: Structural damage to the hull, superstructure, hatch covers, or deck equipment from storm conditions exceeding the vessel’s design limits
• Grounding and stranding: Damage to the keel, bottom plating, propeller, and rudder from running aground on a reef, sandbar, or shallow bottom
• Striking a submerged object: Collision damage from hitting a submerged wreck, rock, or uncharted underwater obstruction
• Flooding: Entry of sea water through a breach in the hull, damaged sea cocks, or broken pipes causing internal flooding
• Ice damage: Hull damage from navigation in ice-covered waters where ice strikes the hull
• Wave damage: Structural damage from exceptionally large wave impacts — particularly for vessels navigating across ocean swell
Fire is one of the most catastrophic marine perils, particularly in enclosed spaces such as engine rooms, cargo holds, and accommodation areas where fire can spread rapidly and is difficult to extinguish at sea.
• Engine room fire: The most common fire loss cause — fuel oil leak igniting on hot surfaces, overheated bearing, electrical short circuit in the engine room. Engine room fires frequently result in constructive total loss or very large partial loss claims.
• Cargo fire spreading to hull: When a cargo of flammable goods catches fire, the damage extends from the cargo to the hull and machinery of the vessel
• Explosion of boilers, steam pipes, or cargo: Boiler explosions, rupture of high-pressure steam lines, and explosion of gas cargo (LNG/LPG vessels) causing structural damage to the hull
• Lightning strike: Direct lightning strike damage to masts, antennas, navigation equipment, and electrical systems
• Volcanic eruption: Damage from volcanic ash fallout on machinery systems or from tsunami waves generated by submarine volcanic activity (relevant for vessels operating in Indonesian and Philippine waters)
• Piracy: Theft, damage, or violence committed by persons from outside the vessel against the vessel and its equipment. ITC Hulls covers piracy as a named peril — distinct from the war risk exclusion (which excludes politically motivated attacks). Piracy coverage is particularly relevant for vessels navigating through the Straits of Malacca, Gulf of Aden, and West African waters, and is now also relevant for vessels trading in the Arabian Sea near the Yemen coast.
• Theft by persons from outside the vessel: Theft of equipment, navigation instruments, or fittings from the vessel when moored in port, provided the theft is accompanied by violence or breaking in
• Barratry: Fraudulent act of the master or crew against the vessel owner — e.g., the master deliberately scuttling or wrecking the vessel. Barratry is a covered peril under ITC Hulls (excluding owner-instructed scuttling).
Note: War risks, mines, torpedoes, and politically motivated attacks are excluded from the standard ITC Hulls policy and require separate War Risk cover under the Institute War & Strikes Clauses — Hulls.
• Accidental damage to machinery: Sudden and accidental physical damage to the main engine, auxiliary engines, generators, boilers, shafting, propeller, and other mechanical systems from any external or internal accidental cause not excluded
• Negligence of master, officers, or crew: Damage caused by the negligent act of the master, officers, or crew in operating the vessel — e.g., mishandling the engine controls causing mechanical damage, navigational error causing grounding
• Latent defect in hull or machinery: Damage resulting from a latent defect (a manufacturing defect that was not discoverable by reasonable examination at the time of manufacture or installation) — the coverage applies to the damage caused by the latent defect, not the cost of replacing the defective part itself
• Negligence of repairers: Damage caused by repairers while conducting dry-dock or shipyard repairs — provided the repairers are not also insured under the same policy
• Breakdown of nuclear installations or reactors (limited): Damage from nuclear contamination (subject to nuclear exclusion clauses)
The Running Down Clause (RDC) is one of the most commercially important sections of the H&M policy. It covers the insured vessel owner’s legal liability for damage caused to another vessel (and its cargo, in certain cases) arising from a collision between the insured vessel and the other vessel, up to 3/4 (75%) of the collision liability.
What RDC covers:
• Repair costs for the other vessel damaged in the collision
• Loss of use (demurrage) for the other vessel while under repair
• Cargo damage on the other vessel arising from the collision
• General Average contributions arising from the collision
The 3/4 structure: Historically, hull underwriters cover 3/4 of the collision liability; the remaining 1/4 is covered by the owner’s P&I Club (Protection & Indemnity Club). This structure reflects the traditional division of marine liability between hull and P&I insurers. Most modern H&M policies in India provide full 4/4 collision liability coverage by endorsement, removing the need to rely on P&I Club for the remaining 1/4 collision liability.
What RDC does NOT cover: Liability for loss of life, personal injury, or death of third parties (covered by P&I); pollution liability; wreck removal; collision with fixed or floating objects (jetties, piers, buoys, platforms) — these are not “Running Down” collisions with another vessel.
General Average: When a sacrifice is intentionally made to save the ship and cargo from a common peril (e.g., jettisoning part of the cargo to refloat a grounded vessel), all parties with an interest in the voyage (ship owner, cargo owners) contribute proportionately to the loss. H&M insurance covers the vessel owner’s General Average contribution and expenditure arising from events covered under the policy.
Salvage: Costs incurred by salvage companies engaged under Lloyd’s Open Form (LOF) or other salvage contracts to rescue a vessel in peril. Salvage charges are covered under H&M insurance for events covered by the policy — and can be very significant (5–30% of the salved value for a major salvage operation).
Sue & Labour: Reasonable costs and expenses incurred by the owner, master, or agents in and about the defence, safeguarding, and recovery of the insured property from a covered peril. Sue & Labour charges are payable in addition to (not limited by) the sum insured — a critical feature that allows the owner to spend what is necessary to prevent a total loss without worrying that the expenditure will reduce the claim settlement.
Institute Time Clauses — The International Framework for Hull Insurance
Hull & Machinery Insurance is governed by the Institute Time Clauses — Hulls (ITC Hulls 1/11/95), the internationally recognised standard terms developed by the Institute of London Underwriters (now the International Underwriting Association). These clauses define the scope of cover, the perils insured, and the important conditions of the H&M policy.
| Clause Group | Content | Key Provision |
|---|---|---|
| Perils Clause (Cl.6) | Lists all insured perils | Perils of the seas, fire, explosion, piracy, theft, barratry, machinery damage, latent defect, negligence of master/crew/repairers, collision (3/4 RDC) |
| Pollution Hazard (Cl.7) | Pollution fines | Covers fine/penalty for accidental discharge, unless deliberate |
| 3/4 Collision Liability (Cl.8) | Running Down Clause | 3/4 of liability to another vessel from collision — most critical liability provision |
| Sistership (Cl.9) | Same-owner collisions | Covers collision between two vessels both owned by the same insured as if owned by third parties |
| General Average (Cl.11) | Shared sacrifice | Covers owner's GA contribution for sacrifices made to save the vessel from a covered peril |
| Sue & Labour (Cl.13) | Loss prevention costs | Covers reasonable costs to prevent/minimise a covered loss — in addition to the sum insured |
| Deductible (Cl.12) | Policy deductible | Applied to each separate accident — not annual aggregate. Higher deductible = lower premium |
| Navigation Limits (Cl.1) | Trading area | Policy defines the permitted trading area (e.g., Indian coastal waters, worldwide excluding war zones) — trading outside limits voids cover unless endorsed |
| Lay-Up Returns (Cl.23) | Premium return | Pro-rata premium return for voluntary lay-up periods exceeding 30 days — significant for seasonal fishing vessels |
| Classification (Cl.4) | Class maintenance | Vessel must be maintained in class at all times. Loss of class without immediate notification and endorsement may void cover. |
The H&M policy is placed on an agreed value basis: the sum insured (the insured value of the vessel) is agreed between the owner and underwriter at policy inception. This agreed value is:
• The basis of settlement for total loss and constructive total loss — the full agreed value is paid without market valuation disputes after the loss
• The limit of underwriter’s liability for partial loss (repair costs, including survey fees and dry-docking)
• Used to calculate the collision liability limit under the RDC
Setting the agreed value: The agreed value should represent the vessel’s current market value (not original purchase price or book value). Underinsurance on an agreed value policy typically does not reduce total loss settlements (as it would under a valued policy), but affects the limit available for partial loss claims. Overinsurance can create moral hazard and is resisted by underwriters. An independent vessel valuation (by a marine surveyor) is typically required for vessels over a certain value or age.
For vessels operating on Indian inland waterways (rivers, lakes, backwaters — under IWAI jurisdiction), a modified form of H&M insurance is available, typically using the Institute Time Clauses — Hulls (Inland Waters) — ITC HULL 01.10.83 or the the insurer Inland Vessel policy wording. Key differences from ocean hull policies:
• Perils: Adapted for inland water risks — flooding, cyclone damage, collision with river banks or bridges, grounding on riverbeds
• Navigation limits: Restricted to specified inland waterways — e.g., NW-1 (Ganga), NW-2 (Brahmaputra), Kerala backwaters
• Premium rates: Generally lower than ocean hull but higher than might be expected given the reduced geographic range, because inland vessels face concentrated perils (annual monsoon flooding, cyclone impact in coastal rivers)
• Vessel types: Barges, ferries, passenger launch, sand dredgers, ro-ro vessels on inland routes, houseboats (Kerala), fishing vessels on inland lakes
H&M Insurance and P&I (Protection & Indemnity) Club membership together provide comprehensive coverage for vessel owners — the two products are complementary and are always arranged together for commercial vessels:
• H&M Insurance covers: Physical damage to the vessel (hull, machinery, equipment), total loss, constructive total loss, 3/4 collision liability (RDC), General Average, Salvage, Sue & Labour
• P&I Club covers: 1/4 collision liability (the balance of RDC not covered by H&M), third-party personal injury and death liability, cargo liability, wreck removal, pollution liability, crew illness and repatriation, fines and penalties
Together, H&M + P&I provide the complete liability and physical damage package for a commercial vessel. For smaller coastal and inland vessels where P&I Club membership is not practical, the H&M policy can often be endorsed to provide fuller collision liability (4/4 instead of 3/4) and some additional third-party protections. Probitas advises on the optimal H&M + P&I structure for each vessel class and trade area. Call 022 4302 0000.
How to Determine the Correct Sum Insured for Your Vessel
Correct valuation is critical in H&M insurance. The agreed value should reflect the vessel's current market value — neither underinsured (leaving the owner exposed) nor overinsured (which insurers resist and which creates moral hazard issues).
The agreed insured value for H&M insurance should represent the vessel’s current market value at the time of policy inception — i.e., the price at which an informed buyer would purchase and an informed seller would sell the vessel in the open market at that time.
Factors affecting vessel market value:
• Vessel age and remaining service life (based on class certificate, refit history, and steel condition)
• Vessel type and market conditions for that vessel segment (bulk carrier, tanker, container, fishing, inland barge)
• Current condition (class maintenance record, last dry-dock survey date, condition of machinery)
• Propulsion type and efficiency (two-stroke vs four-stroke, fuel consumption profile)
• Flag, registration, and class society (Lloyd’s Register, Bureau Veritas, Indian Register of Shipping)
• Fixtures (any existing charter party that affects the vessel’s income and therefore value)
For vessels where market value is unclear: An independent valuation by a qualified marine surveyor (IRS-approved or from a recognised classification society) is required by underwriters and by lenders. Probitas can recommend specialist marine valuers.
A vessel is declared a Constructive Total Loss (CTL) when the cost to repair the damaged vessel exceeds a certain proportion of the vessel’s agreed insured value. Under ITC Hulls, the CTL threshold is when the cost of repair exceeds the agreed value of the vessel (not the market value).
CTL in practice: If a vessel is agreed at ₹10 crore and suffers major engine room fire damage where repairs are estimated at ₹12 crore, the owner can “abandon” the vessel to the underwriter and claim the full ₹10 crore agreed value as a CTL. The underwriter then takes ownership of the damaged vessel and its salvage value.
The importance of correct agreed value: If the vessel is underinsured (agreed value set below market value), a CTL claim pays only the agreed value — leaving the owner with an uninsured gap. If the vessel is overinsured (agreed value above market value), underwriters will resist the claim or negotiate down to market value. Setting the agreed value correctly at current market value is therefore essential for CTL protection.
H&M premium is calculated as a rate on the insured value, influenced by:
• Vessel type: Tankers (highest — fire/pollution risk), fishing vessels (high — poor maintenance, small crew), bulk carriers/general cargo (moderate), barges (lower for non-propelled)
• Vessel age: Premium increases significantly for vessels over 15–20 years. Many underwriters impose age restrictions (no cover above 25–30 years without individual survey)
• Trading area: Indian coastal trade attracts lower rates than worldwide trading. War zone additionality applies for vessels trading to Gulf of Aden, Persian Gulf, or West Africa (separate War Risk premium)
• Classification: Vessels in class (IRS, LR, BV, DNV) attract significantly lower rates than unclassed vessels
• Loss history: Owner’s claims experience over the past 5 years is a major rating factor
• Deductible: Higher deductible = lower premium. The deductible applies to each separate accident; common deductibles are ₹10–50 lakh for coastal vessels, USD 100,000–500,000 for ocean-going vessels
• Safety management: ISM Code compliance (for vessels over 500 GT in international trade) and ISPS certification positively impact underwriting terms
Which Vessel Owners & Operators Need Hull & Machinery Insurance
H&M insurance is essential for every commercial vessel owner and operator in India — from ocean-going bulk carriers to inland river ferries. Any vessel representing significant capital value, or where the owner faces third-party collision liability, requires H&M cover.
How to Respond to a Marine Incident and File an H&M Claim
Marine claims require immediate, precisely sequenced action. The first 24 hours after a marine incident critically determine the claim outcome — particularly for major incidents like grounding, fire, or collision where evidence preservation and salvage decisions must be made immediately.
The master’s immediate responsibilities following a marine incident:
• Safety first: Muster crew, issue distress signal (Mayday/Pan-Pan) if required, deploy life-saving appliances, contact MRCC (Maritime Rescue Coordination Centre) if vessel or life is at risk
• Log all events: Enter a full contemporaneous entry in the Official Log Book and Deck Log — time, position, sea state, events as they developed. This log entry is the primary legal document for the claim.
• Notify owners and managers immediately: The owner/manager must notify Probitas (022 4302 0000) of any incident likely to give rise to an H&M claim within 24 hours
• Protest note: On arrival at the next port, the master must file a Protest Note (formal marine protest) before a Notary Public or magistrate, stating the facts of the incident under oath. This document is essential for claims arising from heavy weather, grounding, and collision.
• Sue & Labour obligation: The owner is obliged under the policy to take all reasonable steps to prevent and minimise the loss. Failure to do so can affect the claim. Engage a salvage company if required — do not delay salvage decisions to wait for underwriter instructions in cases of imminent total loss risk.
The underwriter will appoint a marine surveyor (typically from an internationally recognised marine survey firm — Salvage Association, AMSEC, TMC Marine, or a classification society surveyor) to attend the vessel at the earliest opportunity.
Documents to compile for the H&M claim:
• Protest Note (filed at port of refuge)
• Deck Log and Engine Room Log covering the incident period
• Official Log Book entries
• Vessel’s Class Certificate and Classification Society survey records
• Last dry-dock report and survey report
• AIS (Automatic Identification System) voyage data records
• Cargo manifest and loading/stability documents (if grounding claim related to loading)
• Photographs and video of all damage (taken immediately after the incident and before any repairs)
• Repair estimates from at least two qualified repair yards
• Weather records (meteorological data for the incident position and date) for heavy weather claims
• Port State Control records (if a PSSC inspection was conducted)
For a collision claim: Exchange of particulars with the other vessel (name, flag, IMO number, master’s details), and protest note. Do NOT accept liability to the other vessel without underwriter’s consent.
For partial loss (damage repairable):
• The surveyor will attend the dry-dock or repair yard to oversee and approve the repair specification
• Underwriters must approve the repair yard, repair specification, and estimated repair cost before work commences. Commencing major repairs without prior approval may prejudice the claim.
• For emergency temporary repairs (to make the vessel seaworthy for passage to the repair port): These can proceed without prior approval, but must be documented and the underwriter notified as soon as practicable
• Express freight (urgent air freight for critical spare parts) is covered under the policy — document all such expediting costs separately
For total loss or constructive total loss assessment:
• The surveyor will assess whether the vessel is a total loss, constructive total loss, or repairable partial loss
• If CTL, the owner must formally give Notice of Abandonment (NoA) to the underwriter. The underwriter can accept or decline the abandonment. If accepted, full agreed value is paid; if declined, the underwriter pays only for partial loss repairs (if any).
• Once total loss is confirmed, the underwriter takes possession of the wreck and its salvage value
• Total loss: Full agreed value paid promptly after total loss confirmation and loss documentation — typically within 30–60 days of all documentation being submitted. No deductible applies to total loss claims under most H&M policies.
• Partial loss: Repair costs (dry-docking fees, labour, materials, classification society survey fees) are reimbursed less the policy deductible, after approval of repair invoices by the surveyor
• Collision liability (RDC): Settlement of the third-party collision liability claim is managed by the underwriter’s average adjusters. The owner must not negotiate or settle the third-party claim independently without underwriter consent — this is a policy condition that, if breached, could void the RDC cover
• General Average: GA adjustment is conducted by specialist average adjusters (often London-based) who allocate the GA sacrifice and expenditure among all cargo and vessel interests
• Probitas manages the entire claims process — from initial notification through survey coordination, repair approval, and final settlement — as your appointed broker and claim advocate.
Key Exclusions Under ITC Hulls — What Is NOT Covered
ITC Hulls has specific exclusions — particularly for war risks, unseaworthiness, and wilful misconduct by the owner. Understanding these is critical for continuous, uninterrupted coverage.
Loss from war, hostile act, capture, seizure, derelict mines, torpedoes, and weapons of war are excluded from the standard ITC Hulls policy. War risk cover requires separate placement under the Institute War & Strikes Clauses — Hulls (IWSC).
Loss or damage directly or indirectly caused by or contributed to by nuclear reaction, radiation, or radioactive contamination is excluded from all marine insurance policies.
Loss directly caused by the wilful misconduct of the owner (not the master or crew, whose negligence is covered) is excluded. Owner-instructed scuttling of the vessel to claim the insurance is an absolute exclusion.
If the vessel loses its classification without the underwriter's immediate knowledge and endorsement, or is sent to sea in an unseaworthy condition with the privity (knowledge) of the owner, the underwriter may avoid liability for any loss occurring during that period.
Progressive deterioration of hull plating, corrosion, marine growth fouling, and normal wear to machinery components from regular operation are excluded. H&M covers sudden and accidental damage, not maintenance costs.
If the vessel trades outside the geographic navigation limits specified in the policy without prior endorsement from underwriters, coverage may be suspended for the duration of the breach.
The cost of replacing or repairing a defective part (latent or patent) is excluded — only the damage caused by the defect is covered. H&M is not a warranty or maintenance policy for the vessel's components.
Liability to cargo owners for damage to cargo on the insured vessel is not covered under H&M insurance — it is covered under P&I Club membership. H&M covers only damage to the vessel itself and 3/4 collision liability to other vessels.
The information and product details displayed on this platform are intended solely for general informational and evaluation purposes and do not constitute a legal offer or binding insurance contract. H&M insurance terms, rates, navigation limits, and coverage conditions vary by vessel type, age, flag, trading area, classification society, and claims history. All premium indications are approximate and subject to full underwriting assessment. Policy wording (ITC Hulls 1/11/95 or alternative) and specific endorsements will govern the insurance contract. Probitas Insurance Brokers Pvt. Ltd. · IRDAI Lic. No. 528.
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By submitting you agree to our Privacy Policy and Terms & Conditions. H&M insurance is subject to full marine underwriting, vessel survey, and classification review. Premium rates and policy terms vary by vessel type, age, trade area, classification, and loss history. Indicative terms provided; binding terms from underwriters. Probitas Insurance Brokers Pvt. Ltd. · IRDAI Lic. No. 528.