Insuring their boat is something most owners do without a second thought. Some buy on convenience, some on price, while others automatically renew. With so many options and types of insurance available, it is vital that an owner fully understands what coverage it is they are getting and what they are not. Over the next few issues, Boat Trader will offer a number of articles on boat insurance to provide insight into what is needed and why.
Let’s look at a few basics to start with. Exactly what is insurance? It is a contract between a guarantor (insurer) and an entity (the insured) to be indemnified against financial loss. It is a financial instrument which allows risk to be transferred from the insured to the insurer. It is purchased to protect against the risk of catastrophic financial loss.
What is the difference between a “boat” and a “yacht” when it comes to insurance? Most insurance companies differentiate between the two at 26 feet. A boat policy is designed for the smaller vessel with some different exposures than a “yacht.” For instance, a boat policy typically includes unlimited overland transportation on a trailer, while a yacht policy would restrict overland to around 300 miles. Many boat policies have “Actual Cash Value” (ACV) coverage on the hull and equipment, which means those items would be depreciated at the time of a loss; on the contrary, most yacht policies provide “Agreed Value” hull coverage and “Replacement Cost” coverage on the equipment, which is much better. Yachts are more likely to have exposure under the Jones Act (crew), and coverage for this is essential.
What are typical exclusions? Typical exclusions may include wear and tear, gradual deterioration, marring, denting, scratching, animal damage, manufacturer’s defects, osmosis, blistering, defects in design and ice and freezing.
Where should you start looking for good policies? Ask your boating friends, ask your dealer, check out the web or find a reputable marine insurance specialist. Look for a financially sound insurance company with an A rating or better. This company should have a long history of specializing in writing boat/yacht insurance (some companies jump in and out of the market). Be sure to communicate to the agent everything about the boat and especially your experience in owning and operating a boat. If you’ve ever had a loss on a boat, be sure to explain it fully. Some charge for certain kinds of losses, others don’t. More and more companies are using what’s called “insurance scoring” to rate their policies. This insurance score includes things like your credit score, your marital status, your age, your experience, your driving record, etc. If you have a good credit score it has been statistically proven you take better care of your property, including a boat. The insurance marketplace is very competitive, except in Florida. Many good companies want your business, so let an expert shop for you and find you the best value.
Mike Smith is former president of the Global Marine Insurance Agency.