Do You Need Boat Insurance?

You have just given the nod to the sales consultant about purchasing the boat of your dreams. Before you hitch it up and take a maiden voyage, there is one very important thing you might need, beyond a full tank of fuel.

Insurance is another peice of the boat ownership journey that may not be top of mind when buying a boat. Even though it's not one of the more glamorous considerations during boat shopping, it is still very important to ensure you have care free time on the water with friends and family. You don’t think twice about insuring a vehicle, but what about insurance for your boat? Your homeowner policy might cover a boat, so why bother? Do you even need a separate insurance policy? The answer is yes and no.

A boat insurance policy is required by law in some states. Even if a policy is not required where you live or boat, it might be at the marina where you rent a slip. The same goes for bass tournaments if you plan to compete. You might not be able to even get a loan without providing the bank with proof of insurance that covers the full value of the boat in the event of a loss.

Your state, bank or marina might require proof of insurance. However, a homeowner policy will likely be unacceptable to them. That’s because those policies are limited to boats under a certain length. Even if your boat falls within the criteria, the homeowner policy probably won’t cover the needed provisions to cover the losses for a boat. Boat insurance is designed to cover the specific needs of boaters, so it’s worth researching those policies.

There are two basic types of boat insurance—agreed value and actual cash value. The value of the boat when the policy was written pertains to an agreed value policy. Actual cash value (ACV) policies cost less up front but factor in depreciation. Those policies will only pay up to the actual cash value of the boat at the time it’s declared a total or partial loss. As your boat ages, the insurer will likely insist on an actual cash value policy, which also provides significant savings.

Add-ons to your basic coverage can be a wise idea. Here are a few examples.

• Specialized coverage – Expensive electronic fishfinders with GPS navigation are examples of items that can be covered.
• Salvage – Paying to remove your boat due to damage, from minor to substantial, are covered in this type of policy.
• Consequential damage – Covers a loss that was the result of wear and tear like rot, mold or corrosion.
• Towing – Towing your boat across a body of water can cost hundreds of dollars an hour. These policies are inexpensive and worth the coverage.
• Cruising extension – Like travel health insurance, these policies provide additional coverage if you plan to leave U.S. waters, such as a trip to Mexico or the Bahamas.

How your policy is written is determined by many factors, and those vary by insurer. Some items to consider include the cruising area (where you plan to boat), safe driving records and liability limits, all examples of how costs are equated into the policy. You can also benefit from cost savings by passing an approved boating safety education class.

As stated above, the all-risk policy that provides coverage as listed in the policy is the best choice. Those exclusion-type policies cover just about everything except normal wear and tear and gradual deterioration.

Standard coverages with typical deductibles and average limits cover the following.

• $5,000 for medical payments
• $1,000 limit for personal effects (with $250 deductible)
• $300,000—$500,000 of liability coverage for uninsured boaters
• $500—$1,000 towing and assistance with no deductible
• $1,000 for fishing equipment with a $250 deductible

What if I don't use my boat in the winter, and choose to store it? Ask your insurance provider if they offer what is commonly called a “lay-up” discount. You have year-round coverage with a discount for the months your boat is in storage.

Anyone, with your permission. There are exceptions for high performance boats or personal watercraft, so always read the policy. Also remember that certain states have age requirements on the operation of a vessel.

You should insure the boat for the amount it would cost to replace it with a similar model. That is called “agreed value” or “stated value” coverage. In the event of a total loss, the coverage will pay the full insured amount. Avoid actual cash value coverage, which means the value of your boat will be replaced less the cost of depreciation.