Choosing Boat Insurance.
You recently bought a boat and what a wonderful purchase it is!
Perhaps you use it for fishing, vacations or just having fun on the weekends with friends. Of course just like your home, car and health you will want to protect it against any unforeseen events that may arise. Boat insurance is only way to do this.
When thinking about boat insurance coverage it is important to note that the insurance is not a maintenance policy and will not cover wear and tear, deterioration, etc. Mold, wet and dry rot, and vermin are also excluded from most policies. Therefore, floorboards, upholstery, canvas, foam packing; etc. will not be covered in most cases. Many companies will offer mechanical coverage on new boats for an additional premium.
When considering marine insurance, one needs to understand policy types, coverage limits and limitations.
While your home insurance policy may cover things such as your boat it is not the best option. Always buy a separate boat insurance policy regardless of cost. Then, if you should you experience a liability or medical loss related to the boat, it would not affect your home.
Types of marine insurance policies.
Agreed Value or Stated Value
The agreed value is the amount that the insuree and insurer decide is the value of the hull and attached hardware. Generally, value is determined from the dealer purchase agreement on new boats and by NADA Guide values or dealer purchase agreements for used boats.
It is important to establish and document value prior to loss and pay the necessary premiums. The hull and all attached hardware have a single coverage limit. Should you add any accessories that are permanently affixed it is important to make certain your hull coverage includes the value of those items.
Actual Cash Value
The actual cash value is the amount that the insurance company pays you at the time of the loss. The insurance company has the option of replacing your boat with another boat of similar quality and value or paying you the cash equivalent. This means that if they locate a replacement on the Internet, they have the option of buying it for you or offering you an equal dollar amount.
Boat Insurance Exclusions and Deductibles
As with any insurance policy, it is important to carefully read the policy to ensure that you have all the coverage’s, for that you are paying and need. Many companies exclude certain damages such as damage from underwater objects or damage as a result of freezing. With this in mind you will want to get an all risk policy that has the fewest exclusions possible. Having to add insurance riders to your policy to cover excluded details only adds to the total cost.
Insurance Liability Types
Liability covers property damage and personal injury to everyone except the insured and immediate family members. It protects the insured against financial loss and pays on behalf only if named insured is found liable. This makes liability insurance absolutely necessary however there is choices to make.
Split Limit
Split limit liability coverage is similar to the type of coverage you usually see with automobile liability insurance. Few people understand this type of liability coverage. If your liability limits are 100/300/100, that means you have $100,000 in coverage per person, $300,000 in coverage per occurrence and $100,000 in coverage for property damages. So if you have five passengers in the boat, you only have $300,000 in coverage to split between those five passengers. That’s only $60,000 each. The more people on board, the lower the coverage per person.
Protection and Indemnity
Protection and indemnity coverage is the most common and usually the cheapest type of liability coverage available. Protection and indemnity coverage provides a single dollar limit for both liability and property damage combined which will be paid on your behave in the event of a problem. With this type of coverage the number of people involved does not matter as the limit is on the amount paid out per claim, not per person.
Towing Liability
Towing liability covers your boat and anything that could happen to it while being pulled or towed thus making it a must have. Be sure to confirm that this coverage is included in your policy and never assume that it’s included in the policy as many companies exclude this coverage or charge more for it.
Emergency Marine Services
Emergency services cover the recovery of sunken vessels or prevention of loss from sinking and usually are included in your boat policy. It also covers towing your boat on the water or with a trailer. Make sure this coverage allows for towing service if on the trailer. This is important in the event of an auto accident or axle or bearing problems.
Pollution Liability
We all know about the importance of protecting the environment but often think it is a responsibility of big companies. The truth of the matter is that if you leak fuel or oil you are responsible for paying for the cleanup. Pollution liability covers clean up of fuel or oil in the event of sudden and accidental discharge.
Umbrellas
An umbrella policy provides excess liability coverage. It will pay, on your behalf, for an occurrence for which you are deemed liable after all underlying policy limits are exhausted. Every boat owner should consider one. If you can afford a “toy,” then you probably have assets that need protection, such as a home, retirement plans, future inheritances, etc. Umbrella policies are inexpensive, usually around $150-$400 per million dollars of coverage.
Navigation Limits
Boats, just like cars, have limits for where the policy covers. For example you car’s insurance policy may only tow your car up to 50 miles off road. This is true for boats too. Instead of off road you will find the terms brown water, less than five miles from shore and inland, and blue water, over five miles from land. You will want to ensure that you are covered in the event you are planning on venturing into blue water instead of just inland lakes. Watch for state and area limitations as well. These are restrictions on where the vessel is covered. This is important if, for example, you live in California, but take your boat to Lake Powell in Arizona/Utah.
Lay Up Period
The lay up period is the period of time in which you will lay the vessel up and not use it, usually winter. Many companies offer discounts if you accept a lay up period, but you need to be careful about knowing your lay up period time frame and make sure you don’t use the boat during that time. If you do, you may be without coverage.
Commercial Use
A personal boat insurance policy is exactly that, personal use. You cannot use it for business promotion, events, instruction or charter whether or not a fee is charged. If you deduct it from your taxes as a business item, then you generally need a commercial policy.
Operators
Most policies name the operators of the vessel however; the vessel is what is insured for liability, regardless of who is operating it. Companies just want driver names and experience for rating purposes. Your insurance company uses material information about the operator to determine a premium.
Ownership
If you own an interest in a boat, be sure your name is on the title. You cannot insure or collect your share in the event of a loss if you are not a registered owner. You can be sued, however, as an unnamed or silent owner and have no defense coverage under the policy because you’re not listed.
Insurance is an important and often times confusing choice. We all know that we need it ad hate to pay the amounts required. Hopefully after reading the information provided here you now have a better understanding of the options available to you and what they are for. Happy boating.