Moore Dixon Brokers Limited understands that life insurance is an essential part of financial planning, providing a safety net for loved ones in the event of an untimely death.
However, obtaining this coverage can be challenging for those working as yacht crew. Why? Because there’s a perceived high-risk nature attached to the profession.
Moore Dixon Brokers Limited specializes in addressing these challenges, providing solutions tailored to high-risk professions like yachting.
Take this five-minute read to examine the difference between term life insurance and annual renewable life insurance and explore the unique challenges yacht crew can face in securing these policies. It could save you a lot of problems.
The Basics of Life Insurance
Life insurance is recognised as a contract between an individual and an insurance company. In exchange for regular premium payments, the company agrees to pay a specified sum to designated beneficiaries upon the insured’s death. The purpose is to provide financial support to loved ones, covering expenses like funeral costs, debts, or living expenses.
Two common types of life insurance are term life insurance and annual renewable life insurance. While they share similarities, each has unique features that may make one more suitable than the other depending on individual circumstances.
Term Life Insurance: Predictable Monthly Payments
Term life insurance offers stability with predictable costs. It provides coverage for a specific period, usually 10, 20, or 30 years, with fixed premiums that remain the same throughout the term. If the insured dies during this period, the insurance company pays out the death benefit to the beneficiaries.
One of the key advantages of term life insurance is its affordability. Because coverage is limited to a specific term and does not accumulate cash value, premiums are generally lower than other types, like whole life insurance. This makes it an attractive option if you seek substantial coverage at a reasonable cost.
Term life insurance is straightforward: the policyholder knows exactly how long coverage will last, how much premiums will be, and what the beneficiaries will receive. This predictability makes term life insurance appealing if you want to ensure your loved ones are protected during specific periods, such as while paying off a mortgage or until children are financially independent.
However, once the term expires, the policyholder is no longer covered, and the premiums paid do not accumulate any cash value to be paid to the insured. This means that if you wish to continue insurance coverage after the term ends, you will need to purchase a new policy, which may come with higher premiums due to age or changes in your health.
Annual Renewable Life Insurance: Flexibility with Increasing Costs
Annual renewable life insurance is a type of life insurance that provides coverage for one year at a time, with the option to renew annually. The key difference is that premiums increase each year as the policyholder ages. However, it does not require a medical exam at each renewal, making it easier to maintain coverage even if your health declines over time.
The main advantage of annual renewable life insurance is its flexibility. The policy is renewed each year, allowing you to reassess your coverage needs and adjust as circumstances change. For example, you might choose annual renewable life insurance early in your career when financial obligations are minimal and then switch to a longer-term policy as you take on more responsibilities, such as buying a home or starting a family.
Another benefit is the lack of a long-term commitment. Annual renewable life insurance is ideal if you need coverage for a short period or if you are unsure of your long-term needs. However, this flexibility comes at a cost. Premiums increase each year, so this type of insurance can become prohibitively expensive over time, especially as you age. While affordable initially, the escalating costs can make it less attractive in the long run compared to a traditional term life policy with fixed premiums.
The Challenges for Yacht Crew in Securing Life Insurance
Insurance companies are good at assessing risk before offering coverage, and yacht crew members often face unique challenges due to a perceived high-risk nature of their profession. Working at sea comes with inherent dangers, such as accidents, harsh weather, and the physical demands of the job in stormy seas. These factors can make insurance companies hesitant to offer coverage or may result in significantly higher premiums compared to other professions.
One major obstacle is the classification of the occupation. If insurance companies categorise your job as high-risk, it can lead to denial of coverage or inflated premiums. Even if coverage is available, the terms may be less favourable, with lower death benefits or exclusions for incidents common in the maritime environment.
The transient nature of yacht crew work adds another layer of complexity. Yacht crew members often work in international waters, moving from one country to another, which can complicate the underwriting process. Insurance companies may be concerned about jurisdictional issues if a claim needs to be processed in a foreign country or difficulties in gathering necessary documentation from remote locations.
Logistical challenges can also arise. Yacht crew members typically spend extended periods at sea, making it difficult to meet with insurance agents or undergo required medical exams. The nomadic lifestyle can make it challenging to maintain consistent communication with insurance providers, leading to potential lapses in coverage or missed premium payments.
The Risks of Going Uninsured: Real-Life Examples
There are numerous examples of the devastating consequences when yacht crew members are unable to secure life insurance. Families have been left with significant financial burdens after the unexpected death of a loved one, struggling to cover basic expenses like funeral costs, debts, or living expenses.
One tragic case involved a young deckhand who died in a work-related accident on a superyacht. Despite his youth and good health, he was unable to secure life insurance due to the perceived high-risk occupation. His family was left to cope with both the emotional loss and the financial fallout, including repatriation costs and legal fees.
In another case, a captain suffered a fatal heart attack at sea. Although he had some savings, the lack of life insurance forced his spouse to sell their family home to cover expenses and support their children. Incidents like these highlight the importance of having adequate life insurance, particularly for those working in high-risk professions like yachting.
Navigating the Challenges: Insurance Tips for Yacht Crew
So what can you do? While securing life insurance as a yacht crew member can be challenging, it is not impossible.
Here are some tips to achieve success:
Work with a Specialist Broker: Seek out insurance brokers who specialise in maritime professions. They are more likely to understand the unique risks and have access to insurance products specifically tailored to yacht crew.
Consider Group Policies: Some yacht management companies or maritime organisations offer group life insurance policies for their employees or members. These policies often offer more favourable terms and lower premiums due to the collective bargaining power of the group.
Be Transparent: When applying for life insurance, always be honest about your occupation and explain the risks involved. Withholding information can lead to denial of claims in the future.
Plan Ahead: Start the process of securing life insurance early, before health issues or age makes it more difficult and more expensive to obtain coverage.
Review Your Policy Regularly: Life insurance needs can change over time, so it’s important to regularly review your policy periodically and adjust it as necessary.
Life insurance is a critical component of your financial planning, especially if you are working in a perceived high-risk profession such as yacht crew. Understanding the differences between term life insurance and annual renewable life insurance can help you make informed decisions about the coverage you need. While there are challenges in securing life insurance for yacht crew, taking proactive steps and working with knowledgeable insurance professionals can help to ensure that adequate protection is in place. That will give you peace of mind both as the insured and for your loved ones.
Contact: Moore Dixon Brokers Limited to learn more about life insurance!
