Buying insurance for your boat can be daunting at first, since there are so many new terms to understand. Understanding the basics is the first step in determining what kind of coverage you need.
Loss or Damage
Where coverage of the boat itself is concerned, the three terms you will most-often hear are “agreed value,” “actual cash value” and “replacement cost.”
As implied, an agreed value policy insures the boat to a value that is agreed upon between the owner and the insurer. In the event of a total loss, the policy will pay the full insured amount. If the boat has appreciated in value, you still get what you agreed to and not a penny more.
Actual cash value coverage means the insurance company will pay the actual cash value of the boat on the day it was lost. In other words, the value of the boat, less depreciation.
Replacement cost coverage means that the insurance company will pay the cost to replace the boat, regardless of whether its value has gone up or down.
Replacement cost coverage is generally considered to be the best type of coverage, since there is no haggling about the boat’s value. It’s also the best type of coverage if the boat needs to be repaired, rather than replaced. If you damage your 10 year-old boat, for example, an actual cash value policy will only cover the cost of 10 year-old replacement parts. New parts would be considered an upgrade, since they’re not depreciated. However, since aged parts are almost impossible to find, the boat yard will most likely install new ones, leaving you to pay the difference out of pocket.
Most boaters will prefer to buy a comprehensive policy that covers against a range of perils unrelated to your actual boating activity, such as vandalism and theft.
Boat policies often extend to cover boat passengers as well. Your boat policy may include a provision to cover your medical bills, lost wages, and pain and suffering if you’re hit by another boater who doesn’t have their own insurance, for example.
Personal injury liability coverage protects you from being sued or having to pay out of pocket if you hurt another boater during an accident. The coverage typically includes medical bills, lost income, pain and suffering, and legal expenses.
Property damage liability offers similar protection against the cost of any damage you cause to other boats, docks or property. Another kind of coverage to look for is guest passenger liability, which means you’re covered when someone else is using your boat.
Apart from insuring the boat itself, most boat policies will also provide coverage for a number of other things we might not think about at first. Most (but not all) policies will cover the cost of an emergency tow, for example, or provide coverage for personal effects like cell phones or cameras that are damaged or lost in a boating accident. Some policies will even offer a loss-of-use option, which allows you to rent another boat while yours is being repaired.
If the policy doesn’t include it, see if you can add coverage for salvage and wreck recovery. If you ever suffer a major accident with your boat, this coverage can save you a fortune in fees.
The Fine Print
Discuss your boat insurance needs with an insurance broker that specializes in marine policies. Their experience can prove invaluable, and they can suggest forms of coverage you might not have thought of, such as insurance against damage caused by animals (a huge consideration if you live in the north and store your boat over the winter), or severe storms like hurricanes and tornadoes should you live in areas where they are prevalent.