Hosting a party, conference, or other event on a yacht comes with great liability. You’re not only liable to the boat’s owner for damages, but you’re also responsible for personal injuries suffered by guests.

In the unfortunate event of an incident, the last thing you want is to be held personally liable. Whether you buy or charter a yacht for events, here’s what you can do to limit your liability.

Charter a superyacht

Create an offshore corporate structure to hold your yacht

If you’re going to buy or finance a yacht or superyacht, the best thing you can do is form an offshore corporate structure to hold your yacht.

When your yacht is held by a corporation, you can’t be personally sued for damages. Your business assets will be at risk, but your personal assets will remain untouchable.

The main benefit to using an offshore corporate structure is privacy. In most areas, corporate information can be found through public records. However, some jurisdictions (like Malta) don’t make corporate ownership information public.

You can’t predict marine accidents

Boating disasters can happen at any time without warning. For example, on March 6, 1987, the MS Herald of Free Enterprise capsized in shallow water, killing 193 passengers. This ferry disaster was caused by negligence when someone left the bow-door open. As soon as the boat left the dock, water flooded the decks and the boat was on its side within minutes. This accident led to the creation of the Marine Accident Investigation Board (MAIB) in 1989.

Although the MAIB investigates marine accidents in UK waters, they don’t establish liability. However, the information the organization discovers can be used by the authorities to determine legal liability.

Since this accident boats have been equipped with high-tech sensors to notify crew of bow-door positions and other important notifications. However, even when a boat is equipped with high-tech sensors, human error is always a possibility.

To avoid personal liability, holding your yacht in a corporate structure is a must. You never want to be in a position of being held personally liable for a marine accident.

Get properly insured ASAP

If your boat injures another person in a marina or at sea, your actual boat could be held liable for damages. It sounds strange, but boats are sometimes considered their own entity and can be sued directly.

If your yacht causes damage to another person or another’s property, they could get a court order to “arrest” your yacht. When a boat is arrested, it’s usually auctioned off to pay for the damages.

To prevent this situation, you need sufficient insurance to cover potential damages to people and property. If your yacht causes damage beyond your policy coverage and beyond the value of your vessel, you (or your corporation) could be sued.

Luxury yacht in the Carribean sea

What you can expect to pay for yacht insurance

According to Investopedia, a boat becomes a yacht at 27 feet long and yacht coverage is usually more specialized since yachts travel further and are exposed to unique risks. Yacht insurance contains a set of complex policies like hull insurance, a replacement cost, protection and indemnity insurance, crew coverage, and more.

Yacht insurance will almost always have a deductible that amounts to a percentage of the insured value. For example, an insurance policy with a 1% deductible on a $100,000 insurance policy will have a $1,000 deductible. It’s unlikely for a deductible to exceed 2%.

Understandably, wear and tear and other unavoidable damages are excluded from policies. For instance, gradual deterioration, damage from marine life, marring, scratches, dents, osmosis, blistering, and damage caused by ice and freezing temperatures are going to be excluded from your insurance policy.

For more information on boat insurance, check out Nerd Wallet’s boat insurance guide. The guide discusses what boat insurance will cover, insurance limitations, and how to find the right coverage for your particular boat.

A properly insured yacht makes a great atmosphere for events

There’s nothing better than hosting your parties and events on a yacht. Your guests will appreciate the luxurious atmosphere, blue skies, fresh air, and changing scenery.

If you throw some good events, you’ll appreciate generating a great reputation among your guests and business associates. In the unfortunate case of an accident, you’ll also appreciate being properly insured.