Hull and Machinery insurance covers the insured’s economic interest in the ship, yacht or barge and its equipment. The cover is offered for total and partial losses of the insured property. In addition to protection against physical damage to the ship, yacht or barge, H&M can also extend to the insured’s collision liability arising from contact with another ship or liability related to striking fixed or floating objects. The insurance will also cover the assured’s sue and labor expenses, general average costs as well as salvage costs.

This insurance plays a crucial role in maritime risk management. Here are its key functions:

• Coverage for Physical Damage:
  H&M insurance primarily covers physical damage to the ship's hull and machinery. This includes damages from a wide range of maritime hazards like collisions, grounding, fire, piracy, and storms.
• Navigational Limits:
  The insurance typically specifies navigational limits within which the coverage is valid. This helps in clearly defining the geographical scope of the policy.
• Total Loss Protection:
  It provides coverage in case of a total loss of the vessel, which could be an actual total loss (where the ship is completely destroyed) or a constructive total loss (where the cost of repair exceeds the insured value of the vessel).
• Partial Loss and Repairs:
  The policy covers partial losses and the costs of repairs that are necessary due to insured perils. This is crucial for maintaining the vessel's operational status and value.
• Salvage Charges and Sue and Labour:
  H&M insurance covers salvage charges, which are expenses incurred to save the vessel from further damage. It also includes 'sue and labour' costs, which are reasonable expenses to prevent or minimize a loss.
• Collision Liability:
  Often, this insurance includes a 'running down' clause, covering the shipowner's liability for damage caused to another ship in the event of a collision.
• War Risks and Additional Perils:
  H&M policies can be extended to cover additional risks like war, strikes, piracy, and other similar perils.
• Increased Value (IV) Insurance:
  This is an additional coverage that can be taken over and above the H&M policy, covering the increased value of the ship, often up to a certain percentage of the insured value.
• Mortgagee Interests:
  H&M insurance is important for financiers or banks with a mortgage on the vessel, as it ensures that the asset (ship) is protected against physical damage.
• Policy Customization:
  The scope and terms of the coverage can be tailored according to the specific needs of the vessel owner, considering factors like the type of vessel, its age, operational use, and trading areas.

Cover is always subject to standard market conditions including the English Institute Time Clauses Hulls 1/10/83. The scope of cover solely depends on insured’s requirements.