Learn about the basics of boat insurance and why it's important to obtain coverage to protect not only the boat but you and your family from financial loss.
Whether you’re a beginner or an experienced boater, your vessel is a part of your recreational life that you want to keep safe and damage-free. Obtaining smart insurance for your boat is an excellent way to protect you and your boat from unforeseen damage or financial losses you may encounter while out on the water. But do you know how boat insurance works? What coverage should you have on your boat insurance policy? What boat insurance restrictions should you be aware of? If not, this article is going to answer all these questions!
What is boat insurance?
As the name implies, boat insurance is an insurance policy that protects the boat and the boater from unexpected perils. It covers the repair or replacement cost if your boat sustains damage while you’re out on the water. Boat insurance also provides liability coverage that protects you against third-party claims regarding bodily injuries or property damage caused by your boat. You can’t underestimate the importance of having significant personal liability protection given the increasingly litigious nature of the world.
Why and when is boat insurance required?
Although boat insurance is not legally required in most states, it protects the significant investment you’ve made in your family’s boat. Having an appropriate insurance policy covers costly repairs that could be an unexpected out-of-pocket obligation if your boat is not insured. Besides that, boat insurance is one of the mandatory requirements to apply for financing from a bank to purchase a boat. Even more, many marinas may obligate you to produce evidence of minimum boat-insurance coverage (often, naming the marina as an additional-insured party) while using a slip or mooring. And, if you plan to navigate quite far, most ports of various countries allow you to use their facilities only when you have minimum required boat insurance.
What type of boats can be insured?
Boat insurance covers various commonly-used watercraft, such as:
- Boats (26’ or smaller)
- Yachts (27’ or larger)
- PWC (Personal Watercraft like Jet Ski, Sea Doo)
- Professional-boating equipment
What does boat insurance cover?
Boat insurance, also called boater’s insurance, provides a broad range of coverages, among which the following are the most frequently obtained:
Physical damage coverage
Generally, physical-damage coverage reimburses you for the cost to repair your boat if it gets damaged due to a covered peril, such as extreme weather events (wind, rain, hail, lightning), vandalism, fire, accidents, and collision with other vessels. It also pays you the replacement cost if your boat is stolen in a covered incident. What you’ll be paid out in terms of repair or replacement cost depends on the type of policy you have chosen. There are two types of boat insurance in terms of loss settlement:
Actual cash value insurance
Actual cash value coverage settles your loss according to the current cash value of the boat. It factors the depreciation in your boat’s replacement value while processing your claim. This may significantly decrease the amount of reimbursement.
Agreed cash value insurance
This boat insurance policy settles your claims based on the agreed value of your boat between you and the insurer at the start of the policy. It doesn’t factor depreciation into your boat’s value while entertaining claims. Given the added exposure to the insurance company, this coverage will likely increase your premium, if it’s offered by the carrier.
Liability coverage covers you from third-party bodily injuries or property damage caused by your boat while in operation. As an example, subject to coverage limitations, it provides reimbursement for any third-party medical bills or legal and court fees that may be included in a claim against you.
Medical payment coverage
It reimburses you for medical bills and treatment costs if you or your passengers get injured on your boat.
Towing and assistance coverage
Towing and assistance coverage covers the bills of hiring emergency assistance or towing services for your boat. This can’t be overlooked. For example, this coverage will come into play when your boat is damaged and needs to be towed to a safe location where it can ultimately be repaired.
Personal property coverage
This coverage covers your personal items, like furniture, clothing, fishing equipment, or sports gear, on your boat or while being loaded or unloaded from your vessel.
UM/UIM (Uninsured/Underinsured) boater coverage
This important coverage applies to damages to your boat or injuries sustained by you (or your passenger) as a result of an accident caused by UM/UIM boaters who don’t carry sufficient coverage (or perhaps no coverage) to adequately cover your losses.
How much does boat insurance cost?
Of course it can vary based on numerous factors. As a very general rule-of-thumb, however, an average boat-insurance policy can cost you around $200 to $500 a year. However, the actual cost of boat insurance depends on various underwriting criteria, such as:
- Type, size, model, and age of the boat
- Boat usage
- Geographical location
- Agreed Value or Actual Cash value
- Navigation limits
- Coverage limits
- Boat’s engine horsepower
What restrictions apply to boat insurance?
Here are a few of the key limitations related to boat insurance to start with:
- Navigation restrictions: Most boat insurance policies come with navigation restrictions that limit your boat’s area of operation. A typical boat insurance policy may only allow you to operate in inland or coastal waters (e.g. no international, no salt water, etc.). Your insurer won’t of course cover your boat if you don’t follow navigation restrictions carefully.
- Total horsepower: The higher your boat’s total horsepower, and design of outboard or inboard engines, the more you must pay in terms of premiums.
- Boat length: boat length is a key factor that impacts your premiums. Most carriers draw a distinction between vessels that are above and below 26′ in total length.
- Usage restrictions: Boat-insurance policies obligate you to follow certain usage restrictions. For example, most boat-insurance companies exclude coverage for using your boat for racing or commercial-charter purposes.
Let’s Sum this Up
Boat insurance is an important policy to understand given the potential exposures involved when your on or off the water. To learn more about this coverage or to structure a thoughtful policy to protect your boat and your family, please contact a dedicated advisor at Notable Risk today.
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