A Comprehensive Guide to Boat Insurance
So, you just bought a new boat or yacht and you are quite anxious to hit the water and feel the gentle breeze. Before you take your boat out to the water, you must prepare for the unexpected. Boat insurance is the best way to ensure that you are protected in the event of an accident when you are out on the water. Having the right insurance policy for your boat can give you peace of mind. Don’t let a disaster or accident sink you- Understand everything about how to insure your prized vessel.
WHAT IS BOAT INSURANCE
Just like your car or home, owning a boat is a huge accomplishment both personally and financially. Regardless if you have a personal fishing boat or a party yacht, you want to ensure that all your bases are covered when it comes to insuring your vessel. Insurance policies for boats are designed to provide protection for you and your vessel, should something happen unexpectedly. The policy can include protection for damage to your boat, its motor, and its trailer as well as damage to property or other boats, and injuries to other people.
DO I NEED A BOAT INSURANCE?
You are probably not required by law to have an insurance policy for your boat, however, that does not mean you do not need one. Your bank will ask you to carry insurance if you have a loan on your boat. Your marina might also require you to carry insurance for your vessel. Without giving the bank proof of insurance that covers the full value of your vessel in the event of loss, you will not be able to get a loan for your boat. Most marinas will also require proof of liability insurance before accepting a contract for a mooring or a slip, while some want to be listed as an additional insured on the insurance policy.
So, if your state, your marina, or your bank wants you to have an insurance policy for your boat, a Homeowner’s insurance policy is not enough. This is because Homeowner’s policies are generally limited to boats of a certain size or value and they do not have provisions to cover losses that may occur on a boat. Insurance policies for boats are catered to the need of boaters; allowing you to insure your vessel for its current market value or for an agreed value (discussed below).
If your boat is worth more, getting insurance becomes more important to protect yourself from financial loss. If your boat is worth less or if you are not interested in purchasing an insurance policy, remember it is still an important protection for your boat. Collisions or accidents could happen anytime, causing serious injuries. Even if you are not found liable for such incidents, you could spend a lot to prove your innocence. In contrast, insurance that covers liabilities are inexpensive. Purchasing a liability policy for your vessel will not only cover you for the unexpected but also gives peace of mind while out on the water.
SMALL BOAT INSURANCE:
Small boat owners typically pay lower boat insurance premiums. However, if you have a Homeowner’s policy, the coverage needed for your small boat may be included. The main disadvantage of relying on a Homeowner’s policy for your vessel is coverage for a boat is normally limited to $1000. Therefore, if you have a small boat like a small fishing boat or a dinghy, your Homeowner’s policy will provide enough coverage. Anything larger requires a separate boat insurance coverage.
HOW MUCH IS BOAT INSURANCE A YEAR?
As a rule of thumb, you will be paying around 1.5% of the value of your vessel in annual rates for boat insurance. For example, if your boat is worth $30000 it would cost you approximately $450 per year to have it fully insured. These numbers are only for reference purpose and not an actual depiction of premiums. There are many factors involved in the calculation of insurance premium for your boat. Do not worry, most of the factors explained below actually minimize the cost you pay for the insurance policy.
FACTORS AFFECTING THE COST OF BOAT INSURANCE:
A number of factors, some under your control and some not, can affect the cost of insuring your vessel. Insurance companies have their own way of establishing premium rates through rating matrices. Some of the most common determinants underwriters use to set the insurance rates are; value, age of the boat, length of the boat, type of boat, mooring location, type of engine, previous boating experience, intended area of navigation, deductible amount, and claim history of the owner. In the recent years, insurance companies have also taken into consideration the credit history, the automobile driving record of the owner, and whether they have attended any safe boating classes while deciding on the insurance rates. Understanding these factors would really help you to reduce the cost of insurance.
Here are some factors that may influence how much cost you may pay for insuring your boat or yacht:
- Value of your boat:
When it comes to finding the cost of insurance for your boat, the first factor taken into consideration is the cost of your boat. In general, insurance rates average about 1.5% of the boats insured value. However, you can expect a hike in these premium cost if you are located in a hurricane-prone area. While the actual premium cost depends on various factor, this percentage will give you a rough estimate on what you are expected to pay.
- Clean driving record:
Insurance companies often look at the DMV records of the insured to assess their overall driving record. So, while determining the rate of insurance, insurance companies will often consider things like reckless driving arrests and DUI’s. With this you may end up paying a higher premium if you have a poor driving record.
- Coverage options:
When it comes to coverage, deductibles and limits, you have plenty of options in-hand to include coverage for boating accessories, fishing accessories, and personal belongings. If you are opting for higher limits of coverage, like higher liability coverage, then your premium rates will be high. In contrast, your premium rates will be low if you select higher deductible.
- Additional safety equipment:
Installing additional safety equipment like depth finders, GPS systems, EPIRBs, or radar can definitely help you save some money on premium.
- Credit score:
Now-a-days insurance companies use credit history of a person to determine appropriate insurance rates. A lower credit score means, you will end up paying a more for insuring your boat than other who have a higher credit score.
Many insurance companies use ‘soft pull’ to check your credit score. A soft pull check happens when a insurance carrier checks your credit score, the same way you check your own credit score.
- Diesel engine:
If your boat is powered by diesel, then you can save a lot as it carries lower deductible compared to gas powered boats.
- Multi-policy discount:
Many insurance companies offer additional credit when you include your vessel with your auto policy and/or your homeowners policy. Although, it is one popular option to get insurance at cheaper rates, you must keep in mind that these multi-line companies are not specialized boat insurers. Apart from discounts, you will miss out on other benefits if you are taking insurance with an unfamiliar boat insurer.
- Boating safety courses:
It may be beneficial to take a boat safety course in order to get a cheaper insurance rate for your boat. You are generally entitled to get a five or 10 percent discount on insurance premium rate if you hold a boating safety course certificate issued by the USCG Auxiliary or US power squadron. Discounts also apply for state safety courses, but it should be approved by the NASBLA (National Association of State Boating Law Administrators) and recognized by the US Coast Guard.
- Automatic fire engine extinguisher:
Installing prevention systems in you boat will also entitle you for a discount. Get an automatic fire suppression system for your boat and save on your annual premium.
- No prior claims:
To get the best possible rates, it is quite important that you have a safe boating record. Though some insurance companies do not differentiate no-fault and at-fault claims, be sure to check with your agent and ask which companies do.
- New boat discount:
You can actually save some money for your new expenses, which means, the newer the vessel, the higher the discount.
Some companies offer cheaper rates of insurance if you are not single. Hey, don’t worry, not every insurer will take your marital status into consideration when calculating for insurance premium.
- Insurance already exist:
If you have a boat that is already insured, some insurers will offer you a credit for keeping it protected.
- Navigation area:
Your insurance premium rate for your boat greatly depends on where you intend to use your boat. If you are planning to take your boat out nearby, the premium rates will likely be low than someone who takes their vessel out into the open oceans. So, if you have no intention to take your boat to open ocean, then you need not take coverage for a wider region.
- Age of the insurer:
With regarding to boat insurance, the older your are the better the rates you get. So, don’t worry about getting old.
- Boating experience:
The number of years of boating experience along with your age can also have a positive effect on rate. Someone with 15 years of boat ownership may get a lower rate boat insurance premium compared to a new boat owner.
- Length of the vessel:
The length of boat has something to do with insurance premium rates. In general, boats are under 26 feet in length and are generally considered shorter with less premium rates, while Yachts are over 26 feet in length and yacht insurance premium rates are quite higher.
- Boat usage:
Insurance premium rates also depends on for what purpose you are using your boat. Your premium rates will always be low, if you only take your boat for occasional fishing trips. However, if you tow water skiers, parasails, or wake boarders, then you may end up paying high premium rates.
- Power of your boat:
Boats with higher horsepower attract higher premium rates compared to boats with low horse power.
- Boat’s specifications:
When determining insurance premium rates, year, model, and make of your boat as well as motor, and whether you have inboard or outboard motor will taken in to consideration. Because outboard motors are easier to repair and maintain, they warrant discounts during premium calculation.
For eg. a fishing boat, a yacht, and a speedboat owner will be expecting to pay different premium rates.
- Storage location:
The place where you intend to store your boat is another determining factor for insurance premium. For eg. If you store your boat on a dock in a hurricane prone area will attract higher premium rates than someone who stores their boat in a shed.
- Home ownership:
Owning a home is a good thing that will minimize insurance premium rates for your boat. If you own a small boat, then you need not take a separate boat insurance policy but can include it in your homeowners policy itself.
- Construction and type of the boat:
Boat insurance rates often depend on the quality and fitness of the boat or yacht. When it comes to understanding the vessel construction, the underwriter would be very interested to know the structural strength and adaptability to carry different types of cargo, material used in the vessel construction, and its age.
- Payment terms:
If you pay your boat insurance premium by month or by few times in a year, then that’s fine and it is a standard practice. But, you are likely to get a better boat insurance rates, if you can pay the entire year’s premium in a single time.
FINDING THE RIGHT INSURANCE COVERAGE?
Insurance coverage is the same from one insurer to another, right? While this may be true with many kinds of insurance, it is not necessarily true for marine insurance. Marine insurance companies offering boat and yacht insurance provide a wide range of coverages that often suited to that company’s underwriting ability, expertise, and the type of customers they wanted to attract . Let us understand the coverages available for boat insurance and the things that should be considered before buying an insurance policy. The following information will help you to make an informed decision when buying insurance policy for your boat or yacht.
Basic insurance policy for your boat is available in 2 types; Actual cash value and Agreed value policy, each with different premium costs and different parameters. This is often the first factor to consider when purchasing a marine insurance and this will determine the amount you will get as settlement in the event of loss.
Another factor you have to consider is the specific coverages to include in the policy. Marine insurance policies often have liability coverage, that will settle third-parties in the event of an accident where you are at fault. Other coverages include collision coverage, property damage, and additional boat equipment coverage. There are some marine insurance policies that will even cover PWC (personal watercraft) and boat trailers that are often used to transport the vessel.
When deciding upon the insurance policy, look into the special benefits the company is offering you, like salvage removal and wreckage removal. Also take into considerations the discounts offered like discounts on bundling multiple policies together or discounts on taking a boat safety education course. Lastly, ensure that the value and length of your boat does not go beyond the company’s prescribed limits.
BOAT INSURANCE COVERAGE:
Physical Damage and Liability are the 2 basic sections of a boat and Yacht insurance policy.
- PHYSICAL DAMAGE:
It covers accidental loss or damage to the vessel or its machinery. Physical damage not only covers the engine and the hull, but also the personal property, sails, and other equipment’s in the vessel necessary for its smooth sailing. You can always purchase 2 type of damage insurance coverage for your boat; Actual cash value and Agreed value policy. Let us discuss these 2 types in detail.
- Agreed value policy:
Agreed value boat insurance coverage includes an amount agreed beforehand between you and the insurance company, if something unexpected happens to your boat. If your boat can be repaired, the insurance company will replace old items for new ones without deducting any depreciation. However, this kind of coverage does not cover all repairs and accidents, so it is very important that you first check with your insurer before filing a claim.
Agreed value policies are the most preferred type of boat insurance policy because you exactly know what you will be recieveing if your claim is approved. Some interesting things about this type of insurance policy includes
- Insured can get the total value of their boat back if the claim is approved
- Pre-arranged boat value
iii. Quite expensive, but covers more
- Easy application and appraisal process.
- Actual cash value:
Actual cash value boat insurance coverage is quite different from Agreed value insurance coverage, where it pays only the value of boat at the time the boat was damaged or lost. Certain factors like wear and tear, damage, and depreciation are taken into consideration, so that you will receive considerably less in your hand than if you had chosen Agreed value insurance coverage. But still, there are a few advantages with Actual value insurance coverage, which includes
- Easy application and appraisal process
- More affordable policy compared to Agreed value boat insurance policy.
iii. Claim process is very easy.
How to choose between Agreed value policy and Actual cash value policy:
Before signing the insurance policy for your boat, it is important that you compare both policy types thoroughly. With so many differences between them, it is only you who can decide which is best for you. If you have an issue with the upfront cost, then you want to choose for Actual cash value insurance policy, but keep in mind that you will not receive as much back during the claim process.
What losses are normally covered under physical damage coverage:
Physical damage coverage covers almost all the damage caused to your boat by a wide range of perils. The best insurance policies in the market offers you “all risk” coverage, that covers all losses, except those that are specifically excluded in the policy.
Typical cause of loss that are usually covered includes loss or damage caused by theft or vandalism; weather related perils like hail, wind, rain, wave and lightning action; and collision with other boats, floating or submerged objects, or docks. Always select an insurance policy that covers your boat even when it is stored on land or while transported on a trailer.
Physical damage exclusions differ from one insurance provider to another, so take you time to check all these exclusions to avoid last minute surprise.
Additional coverages included in insurance policies for boat and Yacht includes:
- Personal property coverage:
Including personal property coverage in your insurance policy covers items such as fishing equipment’s, personal effects, clothing, and sports equipment’s. Just like physical damage coverage, this coverage too includes exclusions that differ from one company to another. So, better compare beforehand including this coverage in to your boat insurance policy.
- Emergency Towing & Assistance coverage:
While some insurance policies include Towing and Assistance services automatically, while for others it is optional.
Towing coverage may only be offered while your boat is on water or offered while on land or water. Though, towing may not provide coverage to your repair facility, it may take you to the nearest place where necessary repairs can be done.
Other emergency assistance coverage include such items like parts, fuel. emergency labor, battery and oil while away from safe harbour. However, the cost of these items may not be included.
The amount of coverage vary from insurance provider to another, so check and compare before purchasing one.
- Medical payments coverage:
When you purchase insurance policy for your boat, you must ensure that you have adequate coverage for medical payments. It covers and pay for first aid, hospital, ambulance, and other costs that occurs from someone being injured on your boat, even though you are not responsible for that accident. Also, ascertain if the coverage also includes while someone is being towed behind your boat like water skiing, and someone is boarding or leaving the boat.
- Underinsured/Uninsured Boater coverage:
Underinsured/uninsured boater coverage covers all damages caused to you by another uninsured boater.
- Soft ungrounding: With this add-on coverage, the insurance carrier will tow your vessel back in to water, if your boat is aground (but not in peril) and can be agrounded in a short duration of time with little effort. However, salvage assistance will get activated, if your boat is in peril.
- Total loss replacement: Having this coverage, the insurance company will replace your old boat with a totally new one or pay the original price of the boat, if your boat is totalled.
- Diminishing deductible: Having this coverage, your deductible decreases periodically as long as you don’t file any claim.
- Collision: Having this coverage, the insurer will cover for all the damage caused by a collision which includes cost or replacing or repairing the boat.
- Comprehensive: It covers all other damage caused to your boat by events other than collision, like vandalism and theft.
- Boat trailer: It gives coverage to the trailer you use to transport your boat.
- Personal watercraft: Including this coverage in your boat insurance policy will cover all your personal watercrafts like water scooters, and kayaks.
It covers your obligation to pay third parties. Often, this obligation arises from damage caused to someone else’s property, bodily injury or loss of life, as a result of operation of your boat or result of boat ownership. It also covers your legal fee in case if you are sued by someone for an accident that is usually covered under your insurance policy. Liability coverages for marine insurance policy includes
- Bodily injury liability: Bodily injuries liability coverage protects you from all bodily injuries caused by you to third parties, which includes your passengers and other boaters. This coverage includes all the cost associated with one or more person’s injuries, such as hospitalization, medical expenses and rehabilitation. It also covers for legal expenses, if any.
- Property damage liability: Property damage liability covers damages on property done by you to third parties. It covers the harm done by you to another person’s water skis, dock, boat, or other possessions.
- Pollution liability: It is very important that your boat or Yacht insurance policy must include coverage for those clean-up expenses caused by contamination or oil pollution by your vessel. Some insurance companies will arrange for the clean-up of spill even if your boat sinks.
- Wreckage removal: If your boat sinks and removal of it is mandated by law, then insurance companies will do it for you. While some insurers will add this benefit in every boat and yacht insurance policy, others offer it as an add-on coverage that should be purchased separately. Wreckage removal coverage covers for the disposal or removal of wreck, especially if the wreck is deemed to be a hazard in navigation.
Liability insurance for your boat will also include legal fee in the event someone files a lawsuit against you. Without adequate liability insurance coverage for your boat, all the above expenses would be paid by you out of your pocket. The main reason to get adequate marine liability insurance is to protect your finances in the event of an accident.
HOW TO SAVE MONEY ON BOAT AND YACHT INSURANCE:
Figuring out the cost of insurance for your boat is not easy until your approach the insurance provider. There are a plenty of factors that needs to be considered when a insurer is finalizing a boat insurance quote. However, there are a few things you can do to help reduce your boat insurance rate.
- Look for discounts:
Most boat and yacht insurance providers offer discount for boaters when they pass a boat safety education course. You may also get discounts when your boat is a diesel powered craft, has ship-to-shore radios installed in it, has coast guard approved fire extinguishers, having multi-policy with the same insurance provider, and have no accidents on record.
- Boating areas: Insurance cost is often determined by the area you will be boating. Coastal regions, and hurricane prone areas, attract higher premium and deductibles.
- Your driving record: Your boating record will have a great impact on the boat insurance quote. While figuring out the cost of premium, your boat driving record will be taken in to consideration along with your experience as an operator, and what kind of boat it is.
- Diesel powered boats:
To get a good discount on your boat insurance policy, buy diesel powered boats. Also, speed boats and old boats attract huge premium and deductible.
- Higher deductible: Certain insurance providers offer flat deductible rates while others charge a percentage of the boat value. You will get discounted premium if you agree to a higher deductible.
- Fewer claims:
Finally, the fewer the claims you file, the better rate you get on insurance premium.
Boat and yacht insurance is similar to any vehicle insurance where you have to take a large number of factors into consideration when selecting an appropriate policy that fits your need. Boat insurance policies protect you against the physical damage caused to your boat, equipment and machinery. Many boaters spend huge amount of money buying boat, and then they choose the cheapest insurance they can find thinking they wont need it. But, the unforeseen can happen anytime in life and having a good boat insurance policy with proper coverages gives you the peace of mind while enjoying your watercraft.