Over 87 million U.S. adults participate in recreational boating with over 11.87 million boats registered, according to Statista. If you’re one of these recreational boaters looking to buy a new boat, there are a number of insurance considerations to take into account to ensure full protection. Whether you’re looking forward to basking in the sun on the open sea or fishing on a nearby lake, your boat will have unique insurance needs to protect your wallet from financial risks.
Why do you need boat insurance?
Most homeowners’ policies will not cover boats or water-related incidents. On rare occasions, your homeowners’ coverage might include a small line of coverage for small boats used near your home. However, boats bring with them their own risks, like tempests, other boats, and even sharks. This means that your protection on the water is different than on land, so the types of necessary insurance are different as well.
Boats are an investment in the same way a house or car is. Boat insurance protects your capital asset in the case of an unexpected incident. If your boat were damaged or stolen, repairs or replacement could do serious damage to your wallet.
Boat insurance also helps protect from liability if a third party is hurt on or by your boat. Liability costs can be exorbitant, including medical bills, property damage, lost income, and even pain and suffering. In some cases, boat-related liability can be thousands or millions of dollars that you would have to pay out of pocket without proper boat insurance.
So what do you need to consider in order to fully protect your boating risks from damage or liability?
1. Boat Type
What type of boat do you have? Is it small or large? Is it slow or fast? A sunfish sailboat will call for different insurance costs than a motor yacht, because they carry different sorts of risks. Often, the insurance company will consider the length and size of the boat as well as the associated risk with that type of boat.
2. Boat Value
Like a homeowners’ or auto policy, the value of your boat will determine how much your insurance will cost. You will want to insure the amount of the value of the boat if it were lost, stolen, or totaled. In this way, the total cost of insurance for a higher value boat will cost more than a low value boat. In order to buy more coverage for a higher value, you generally need to pay more in premiums.
3. Boat Usage
How will you use your boat and what is it equipped to do? For example, a fishing boat will have different insurance needs than a yacht with sleeping quarters. This will not only determine the risk needed to cover but also additional contents and amenities. If you have accessories or goods held on your boat, you’ll need a higher line of coverage to cover those additional contents. For example, covering expensive navigation or GPS equipment will raise your insurance costs due to the added protection.
4. Boating Location
Where you’ll be boating will also determine your insurance risk. Some waters are considered riskier than others, so they’ll cost more. For example, boating long distances on the ocean will likely hold more risk than hanging out on a lake behind your house. As another example, waters off of Somalia might be excluded from your coverage because of dangerous Somali pirates.
It’s crucial that you discuss where you’ll be boating with your insurance agent to guarantee your boat is covered in those waters. If something were to happen in waters where you aren’t insured, you will be responsible for the entire costs.
5. Boat Transport/Storage
When your boat isn’t in the water, it’s likely covered under a different insurance. If something happens to your boat while attached to your car or truck, it would be covered under your auto policy. In this way, it would be subject to your car insurance coverage lines. If you’ll be transporting a boat with your car or truck, you’ll want to ensure that your auto policy has a high enough line of coverage to cover your boat as well as your car. For example, you get into an accident while transporting your yacht attached to the back of your car. You would only be covered up to the limit of your auto collision coverage, which could be less than even the value of the yacht.
In a similar vein, if you store your boat on your property during the winter months, the boat would then be considered under your homeowners’ insurance.
In this way, you may want an umbrella policy for your auto and home insurance to help raise additional limits for your on-land boat coverage.
6. Coverage Types
The type of boat coverage you purchase will determine your protection and costs. Typical types of boat coverage include:
- Liability (bodily injury and property damage): protects if you are found at fault for a third party’s injuries or property damage (required)
- Comprehensive: covers damage to your boat in the case of a theft or “acts of God,” like a tempest breaking your sailboat mast
- Collision: covers damage to your boat if you get into a collision with another boat, dock, or stationary object
- Contents/equipment coverage: helps cover contents, equipment, and amenities you have on boat
There are other types of coverage you might need depending upon your boat type and usage. For example, you may consider salvage coverage and wreck removal, fuel spill liability, fishing coverage, or ice/freeze coverage.
7. Insured Value
There are two types of valuations when considering your boat insurance: agreed value or market value. This is how much you would be paid out in the case you need to fully replace the boat (loss, theft, total damage). Agreed value means you would be paid out the sticker price that you paid for the boat regardless of depreciation. If you paid $10,000 for the boat, you would receive $10,000 back.
With market value, the insurance company will pay out the amount that the boat is worth with depreciation at the time of damage. If you paid $10,000 in 2010, you would be paid out the cost of that 2010 model boat even if it crashes in 2017.
Often, new boat owners will choose agreed value in order to fully protect their new purchase (because depreciation begins the moment the boat steps off the lot). However, agreed value tends to increase the cost of premiums. Owners of older or used boats often choose market value to lower these premiums.
Are there any discounts for which you apply? When buying insurance, you will want to discuss potential discounts with your agent to find the highest line of coverage for less. Possible discounts include:
- Good boating record
- Boating safety classes
- Navigation area discount
- Safety features onboard
Don’t forget that most companies offer bundling discounts, which can lower the cost of your auto, home, and boat insurance.
The Bottom Line
If you’re buying a new boat, you’ll want strong lines of insurance coverage to fully protect your new investment from damage and liability. You can learn more about how to insure a new boat with our article, The Ultimate Guide For Insuring Your Boat.
To guarantee you receive the best insurance bang for your buck, talk to an agent about your boating needs and potential discounts. Our InsuraMatch agents will find you the perfect boat insurance for your nautical fun.
Get a quote now and start protecting your boat purchase before it even leaves the lot!