Boat insurance basics
Do I need insurance for my boat?
You probably bought your boat for fun, and when you think of FUN, the last word that comes to your mind may be INSURANCE. But of all the money you spent, and will continue to spend, on your boat, boat insurance may be the smartest dollars you spend. Besides, some marinas won’t let you dock your boat unless you’ve got insurance.
Homeowners’ insurance policies usually include coverage for watercraft, but the coverage is often very limited. Typically, a home insurance policy will pay up to $1,000 if something happens to your boat while it’s at your house. The policy may even offer some liability coverage for you while you use your boat, but it’s less than ideal.
The insurance industry generally places watercraft into three categories:
Boats: Generally between 16 feet and 25 feet, 11 inches in length
Yachts: Generally 26 feet or greater in length
Personal watercraft: Jet skis, wave runners and other similar vessels
All three types of vessels (boats, yachts, pwc) require different types of insurance coverage. As with many other types of insurance, policies vary quite a bit from company to company. If you’re in the market for boat, yacht or personal watercraft insurance, comparing different companies’ policies can be tricky. Read each policy carefully.
Yachts and boats less than 15 years old are typically insured on an “agreed value” basis. That means the insurer will pay the full amount for which you’re insured in case of a total loss. There’s no depreciation deduction. Vessels, like cars, lose value as they age. Insurance companies usually re-evaluate the market value of a boat every five years. That way, the coverage more accurately reflects your needs.
Boats more than 15 years old are covered on an actual cash value basis. In case of a total loss, the insurance company would pay you what the boat is worth, minus depreciation. No matter the age of the vessel, insurance companies will only pay the actual cash value of some items – such as sails, covers or outboard motors.
If you suffer a partial loss, the old, damaged items are usually replaced with new ones. Insurers sometimes refer to this as “new for old.” Both yacht and boat insurance can also include uninsured boat, towing and medical payments coverages.
Uninsured boat coverage serves the same purpose as uninsured motorist coverage does in car insurance: to cover you in case the other vehicle doesn’t have insurance. Medical payments coverage pays for medical costs incurred by someone on your boat. Towing coverage pays for the cost of having a commercial outfit tow your vessel back to port if it breaks down.
Boats Under 26′
Most of the vessels that fall under the definition of “boat” are smaller powerboats and sailboats. Boat insurance typically covers physical damage and liability.
The physical damage coverage pays to repair or replace your boat if it’s damaged or destroyed by fire, theft, lightning, vandalism or windstorm. (Unlike home insurance in many coastal areas, boat and yacht insurance cover damage from hurricanes and tornadoes.)
Covered items usually include the boat itself, outboard motors, the boat’s trailer and personal property kept aboard the boat. However, your personal effects — things that aren’t part of the normal operation of your boat — are not covered. Some companies offer separate coverage (at an added cost) for fishing equipment, cell phones and computers that you use aboard the boat.
Liability coverage protects you if you’re found responsible for damage to property or injury to someone other than you or a family member. So if you hit another boat or a guest is hurt aboard your boat, you’d be covered. When it comes to boat insurance, liability coverage is often offered in $100,000 increments, up to $1 million. In our lawsuit-happy world, it pays to have this coverage.
Sport-fishing boats, larger sailboats and cruisers fall into the category of yachts if they are at least a certain length, typically 26 feet and up. Much like boat insurance, yacht insurance offers two main types of coverage: property damage and liability. However, with yacht insurance, they’re called hull coverage and property and indemnity coverage.
Hull coverage pays to repair your yacht if fire, theft, windstorm, lightning or vandalism damages it. Basically, it covers the entire yacht, including sails, furniture, outboard motors and machinery — anything used to operate or maintain the yacht. Some dinghies and trailers are covered under separate policy endorsements.
Protection and indemnity coverage pays if you’re found liable for damage to property or injury to someone other than yourself or a family member. As with boat liability insurance, it’s usually offered in $100,000 increments, but is also available at limits of more than $1 million.
Yacht owners can also buy what’s known as a hurricane protection endorsement. That pays to haul your yacht out of the water if a hurricane watch or warning is issued. It also pays to put the ship back in after the hurricane has passed. The coverage would also pay the costs of hiring a professional to get your yacht to a safe harbor because of an impending hurricane.
One big difference between yacht and boat insurance is that yacht insurance often comes with several “warranties.” A navigational warranty restricts the operation of your yacht to a specific area. That means that your coverage only applies as long as you use the yacht in that region, which could be as large as the entire East Coast or West Coast, or as small as Chesapeake Bay. If you plan to take your yacht outside your navigational area, most companies offer what’s known as a trip endorsement to expand your coverage.
Personal watercraft insurance
Getting insurance coverage for your jet ski can be more difficult, as there are higher risks involved with jet skis. According to statistics from AAA Michigan, 45 percent of all the boating accidents reported in 1995 involved personal watercraft. Operator inexperience was blamed in 95 percent of the personal watercraft accidents.
If you own a personal watercraft, you’d be wise to purchase insurance coverage that includes bodily injury, property damage, liability and theft. The liability limits of these policies is typically $15,000, but can be increased to suit your needs.
Keeping boat insurance costs down
The cost of a policy depends on several factors, including the type of vessel (such powerboat, sailboat, performance or pleasure cruiser), its size, its age, where it’ll be used and even the boating experience of the operator.
According to the Insurance Information Institute, insuring a 25-foot speedboat worth between $20,000 and $25,000 would cost between $500 and $900 for physical damage coverage and about $5,000 for liability coverage. Before your eyes bug out any further, keep in mind that speedboats will be on the high end of the scale. A similarly sized sailboat might cost 25 percent to 50 percent less to insure. Just as sports cars are more expensive to insure than sedans, fast powerboats will cost more to insure than sailboats.
There’s plenty you can do to keep your insurance costs down. For one, you can (and should) take an approved boating safety course. These are offered around the country by the U.S. Coast Guard Auxiliary and the U.S. Power Squadrons, and can give you a premium discount of anywhere from 5 percent to 20 percent. In some states, such as Connecticut, you are required to take one of these courses to operate a boat.
Premium discounts are also usually available for newer boats, protective devices (like a depth finder, ship-to-shore radio or burglar alarm) and for getting your vessel inspected by the Coast Guard Auxiliary (these inspections are often free). Some companies even offer discounts for vessels powered by diesel engines.
As with any insurance policy, higher deductibles can lower your premiums. Deductibles for watercraft policies range from 1 percent to 10 percent of the coverage. So if you have $20,000 in coverage, a 1 percent deductible would be $200. Before you opt for a higher deductible, you should make sure you can afford to pay it.