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10 Important Things to Know About Boat Insurance

Wednesday, 14 June 2017

10 Important Things to Know About Boat Insurance

Written by: John Hawthorne

You just bought a really sweet boat. A fine piece of watercraft that will allow you to zip about on a body of water with the wind in your hair and the water on your face. You can’t wait to get out there and start using it. To glide over the water on waterskis. To sip a cold beverage while being gently rocked by the waves. To embarrass your kids by wearing a Speedo that’s two sizes two small. To take guests out for pleasure cruises on moonlit evenings.

But before you can get down to business, there’s one crucial piece of information you need to consider: boat insurance.

Before you unleash the full power of your watercraft, you need to give some time and thought to how you will insure your boat. Yes, I know, this isn’t a particularly exciting subject, but it’s an important one.

Thankfully, we’re here to help. Let us answer some of the crucial questions you have about protecting your precious boat.

In this post, we’re going to answer 9 crucial questions about boat insurance. The answers will allow you to make an informed decision regarding how you insure your boat.

Let’s get started.

QUESTION #1: What Is Boat Insurance?

Let’s construct a hypothetical situation. You’re out on the lake, enjoying a gloriously beautiful day, just happy to be alive and a boat owner. You’ve applied all the necessary sunscreen / tanning oil to your body and are soaking in the rays.

Unfortunately, your day of happiness is abruptly ruined when you strike a boulder that was hidden just under the surface of the water. Your beautiful, gorgeous, well-maintained boat suddenly has a giant gash in the side, hurting both the boat and your heart.

This is where boat insurance comes onto the scene. If you have boat insurance, you can be confident that your vessel will be repaired to its former state of glory and the costs will be covered by the insurance company.

If you don’t have insurance? Let’s just say you’re up a creek without a paddle. Actually, you’re in a sinking boat because there’s a giant hole in it, but you get the point.

Boat insurance protects you in the event of damage to or even the loss of your boat. See! Boat insurance really can be a fun topic. Well, not fun, per se. But more fun than having to pay thousands of dollars to fix your boat.

QUESTION #2: How Exactly Does Boat Insurance Work?

Sometimes, boat insurance can be bundled with your car insurance and your home insurance, sparing you the hassle of trying to find a separate insurer for your boat. Just like any other kind of insurance, when you purchase insurance you have to make decisions about:
- How much deductible you’ll have
- The type of coverage you want
- The amount of coverage you want

So far, so good.

When you go to insurance companies, they will consider the following factors:
- Age of boat 
- Length
- Value
- Speed/horsepower
- Condition (Are US Coast Guard standards are met?)
- Is it a houseboat used as primary residence? (This would be awesome, by the way).
- Type of boat? (Inboard, outboard, utility, cruiser, bass boat, saltwater fishing boat, performance boat)
- How many owners?
- Where will it operate? (ocean, lakes, bays rivers, Great Lakes)

Depending on the answers to these questions, the cost of your policy will be higher or lower. So, for example, if you own a high speed houseboat that doesn’t meet US Coast Guard Standards and is worth $50,000, you’ll probably be shelling out quite a lot of cash to insure your boat.

QUESTION #3: How Does Home Insurance Differ from Boat Insurance?

Believe it or not, some home insurance policies will actually cover your boat if it’s small, but if it’s worth more than $10,000, you’ll probably need to purchase a separate policy.

A boat policy also includes liability coverage if someone is injured aboard your boat. For example, if your friend has had a few too many drinks and is salsa dancing while you’re traveling at 50 mph and accidentally trips and breaks his leg, you’re covered. Do you really have friends who would do that? You may want to reconsider some of your life choices.

A boat policy also will allow you to suspend coverage when you’re not using your boat. For example, if you don’t plan on doing much boating during the winter, you can put a hold on your coverage.

QUESTION #4: What Is Covered in Your Boat Insurance Policy?

Here are the items traditionally covered in boat policies:
- Collision damage. This includes repair and replacement of boat, but maybe not clean-up wreckage. Just don’t totally sink your boat and this won’t be an issue. If you’re legitimately concerned about this perhaps you shouldn’t be driving a boat in the first place.

- Property damage liability. If you accidentally crash into someone else’s boat or destroy someone’s dock, you’re covered.

- Engine damage. You’ll want to double check on this one because some policies will have machinery damage exclusions.

- Bodily injury liability. If you accidentally hurt someone while operating your boat, you’ll be covered. If this point makes you happy, you may want to be psychiatrically evaluated.

- Weather damage. Some policies will cover weather-related damage to your boat, although you’ll certainly want to check on this one.

- Comprehensive. Coverage can provide payments for medical payments, fishing equipment, oil spills, personal property, roadside assistance, uninsured or underinsured incidents. 
 
QUESTION #5: Is Your Boat Covered When It’s Out of Water?

Why must you ask all these questions? Just kidding. We like helping. If your boat is on a trailer being pulled by your car, it’s covered by your auto policy, although the limits of your policy apply, so familiarize yourself with those.

Your homeowner’s policy may provide limited coverage if your boat is damaged while on your property, but it might not cover vandalism or if your boat is stolen.

QUESTION #6: Does Your Boat Insurance Policy Cover You Everywhere?

Most policies for smaller boats have a “navigational warranty”, which determines where you boat insurance policy is in effect. For example, your policy may cover you for the inland waters of the US and Canada or the coastal waters of the two countries.

Policies for larger boats typically have different areas covered, like the territories between Eastport, Maine to Cape Hatteras, North Carolina.

There are some places that could be excluded for security reasons, like if you’ll be sailing in an area inhabited by Somali Pirates. Listen, if you’re in an area like that, you’ve got bigger problems than your insurance policy. Like what type of assault weapon you should choose.
 
QUESTION #7: Are You Required to Have Boat Insurance?

Some states may require you to have liability coverage. Some marinas may require you to have insurance to dock your boat. Finally, the lender may require you to have insurance before giving you a loan.

But seriously, why would you not have boat insurance? Unless you’re an independently wealthy billionaire who is able to purchase boats without a second thought, you probably should have some form of insurance.

QUESTION #8: What’s the Difference Between Agreed Value and Market Value Policies?

It works like this. The moment you purchase your boat, it starts depreciating in value. Isn’t that a wonderful thing?

An agreed value policy covers the value of the boat when the policy is written. A market value policy covers the actual market value of the boat when any damage occurs. Agreed value policies usually cost more upfront but you don’t need to worry about depreciation.

No matter what policy you start with, your insurer will probably eventually insist you switch to a market value policy, which will save you money anyways.

QUESTION #9: What Does Boat Insurance Typically Cost?

As you would expect, the cost of your policy will depend on a large number of variables, including:
- The state where you reside
- The type of boat
- The age of boat
- The size of the motor
- How you use the boat
- Where you use the boat
- And a variety of other factors
 
QUESTION #10: How Can You Save Money on Your Policy?

First, buy a policy that is very specific to your boat. Don’t purchase a policy that offers coverage you don’t need. To put it bluntly (because we know you can handle it), that’s stupid.

Second, ask your underwriter if they offer any discounts for safety features. For example, a wireless auto tether that kills the engine if you or one of your passengers falls overboard. If they do offer safety discounts, consider investing in those safety measures. Also, consider doing the safety dance, just for fun.

Third, see if there are any discounts available for taking safety classes. You may be able to reduce your premium simply by attending one of these classes.

Fourth, take advantage of any times when you won’t be using your boat to suspend your coverage. Don’t pay for those months your boat is sitting idle (see above note re: stupid).

Finally, you may be able to get a discount if you’re boating in fresh water rather than salt water.
 
Conclusion
Boat insurance is like a prostate exam: you hope you never need it but it’s pretty important. So, while it’s certainly not fun to research which policy you should use, you can make the process as painless as possible by knowing what you need, how you’ll be using your boat, and ways you can cut the costs.

Now then, happy sailing!

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