Loss of hire
Insurance indemnifying the shipowner for revenue lost while a vessel is out of service after damage covered by its hull policy, beyond a deductible in days, the maritime equivalent of business interruption.
When a vessel is damaged, the hull policy pays for repairs, but not the revenue the owner loses during the outage: a time-chartered vessel stops earning its daily hire as soon as it is off hire. Loss of hire insurance covers this loss. It responds only if the outage results from damage covered by the hull policy, or, depending on extensions, by the war cover; it is thus dependent on the vessel's insurance. It pays an agreed daily amount, often aligned with the charter hire, beyond a deductible expressed in days, for example fourteen, and up to a maximum number of days per casualty and per year. Mechanical breakdowns without a covered cause, commercial delays, regulatory detentions or strikes are not covered, unless extended. For the underwriter, the risk depends on the likely duration of repairs, and thus on the availability of shipyards and parts, and on the value of the hire, which follows the freight market: the same damage costs far more in loss of hire when charter rates are at their peak.
Hypothetical case: a container ship chartered at 40,000 dollars a day suffers an engine room fire covered by its hull policy and spends 60 days in the yard. With a 14-day deductible, loss of hire insurance pays 46 days, or 1.84 million dollars, on top of the repairs paid by the hull insurer.
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