The air is warming and summer is quickly approaching, so it’s time to break out the bathing suits, sunscreen, and boats! If you are one of 12.7 million recreational boat owners in the United States, you probably can’t wait to feel the sea spray drizzling against your face as you navigate your boat across the waves.
But just like you should use SPF sunscreen to protect your skin, you should also consider appropriate boat insurance to protect your favorite summertime asset.
Why do you need boat insurance?
Many people assume that their homeowners’ policy will cover their boat as well. While some companies lump boat coverage into homeowners’ insurance, these policies often do not cover all of your boating-related needs. For example, most homeowners’ policies will not cover boats that are over a certain length, valued above a certain amount, or driven outside of the “beach inlet.”
Think of boat insurance as similar to auto insurance. You wouldn’t insure your car under your home policy because a car has different needs than a house. In the same way, your boat has different needs than those assets that remain on dry land.
You want specific insurance that protects those marine-related incidents.
How does boat insurance work?
Similar to auto insurance, buying boat insurance involves several factors. How much you pay and how much you will be protected will depend on the amount of coverage, types of coverage, and the deductible.
Step 1: Determine Vessel Type
First, you will need to see what kind of marine policy will apply to your type of vessel. Is it a boat (26 feet and under); yacht (27 feet and over); sailboat; dinghy; rental; boat club; or a professional boat (those used in tournaments or commercially)?
Your policy is directly related to the type of boat you are insuring. Other relevant factors include:
- Age of boat (Has it had damage or depreciation in the past?)
- Condition (Does it meet U.S. Coast Guard standards?)
- Residence (Is your boat used as a primary residence?)
- Function (How is it used: inboard, outboard, utility, cruiser, bassboat, saltwater fishing boat, performance boat, houseboats with no motor?)
- Ownership (Does it have more than one owner?)
- Operation (Will it operate in ocean, lakes, bays, or rivers?)
Seth Miller, an InsuraMatch agent, says, “The best advice I can give to someone looking for boat insurance is to call with all the info about their boat ready. Know the type of motors, the year, the make, and the model.”
Your insurer will need to know everything about your boat. The process will be a lot faster and simpler if you have that information ready to go at the first consultation.
All of these factors together will give you and your insurer an idea of the current or expected usage of your boat. You need to know how the boat will be used in order to assess the risks it will be facing.
Step 2: Selecting Types of Coverage
Boats are unique in that they involve different areas of insurance, from collisions to personal liability to theft and beyond. Because of this unique blend of situational needs, it is important to understand the types of coverage available to you and what each type of coverage would do for you in case of a claim.
Comprehensive: This is overarching coverage that will pay for damages not caused by collision. For example, this would cover most vandalism, theft, and tide damage.
Collision Damage: This includes costs related to repair or replacement of the boat due to collision. While this could be bundled with your homeowners’ policy, this coverage usually does not include clean up of wreckage or towing expenses. For that protection, you will need a separate boat insurance policy, known as “salvage.”
Salvage: This boat-specific coverage will pay to remove your boat in case of wreck or damage (if it cannot be navigated back to shore). Towing a boat can cost up to $400 per hour! It is recommended to include this in your insurance plan due to the exorbitantly high cost of salvage after collisions or other damage. Think of salvage coverage as the boating equivalent of “roadside assistance.”
Property Damage: This covers the damage you could cause to someone else’s boat, dock, or other property.
Injury: Similarly, “injury” covers any cost of damage you might cause to a person while using your boat, including medical bills, pain and suffering, and legal expenses.
Personal Property: Similar to homeowners’, this coverage protects all the “stuff” inside the boat. This is especially important if your boat is used as a residence or cruiser, as these tend to house higher-price assets like furniture and valuables.
Specialized: This coverage is for a specific item on your boat, like navigation equipment, anchors, or fishing tools. Not all of your boating goods need to be covered, but specialized coverage is to safeguard those valuable items that could be stolen or damaged.
Consequential Damage: This coverage will pay for damage to your boat due to wear and tear as opposed to active accident or theft. This may include rot, mold, corrosion, or other long-term damages (that you could not protect against using certain measures).
Additional Circumstances: Some insurance companies require a separate coverage plan to cover injuries and damage caused by uninsured boaters. Also, if you have a commercial boat for fishing or oil, you will also likely need separate coverage.
Cruising: This “cruising” coverage provides an additional—often temporary—plan if you will be leaving the United States in your boat. For example, if you are using your boat to vacation to Mexico or the British Virgin Islands, you will need specific “cruising” insurance.
Most insurance companies only insure within U.S. waters, and there may be some areas that are considered “uninsured.” For example, some yachts may not be insured in certain lakes, or your boat may not be protected in areas where modern-day pirates are known to frequent. (Yes, pirates do still exist—and you want to insure against them!)
You will likely not need all of the above coverage types. Work with InsuraMatch to find which plans will be most relevant for your protection.
Step 3: Choosing Coverage Value
There are two basic types of boat insurance, which can then include different forms of coverage within them. These two primary types will determine how much you would be paid for a given claim.
1. Agreed Value
When you see “agreed value,” think of the sticker price of your boat at the time you’re insuring it. This means the company will pay in accordance with value of your boat at the time the policy is written. This is an agreed upon price upfront that does not change and does not include depreciation.
For example, you buy a boat in 2014, insure that boat in 2015 with an agreed value plan, and then you make a claim in 2017. Even though the boat has depreciated in value from 2014 to 2017, you will receive the amount of money that your boat was worth in 2015, when you insured the boat.
While this sounds great because depreciation of the boat is not included, it costs significantly more upfront and deductibles tend to be higher.
2. Actual Cash Value
The actual cash value plan takes into account the depreciation of the boat. At the time of claim, you will receive the amount in relation to the boat’s current value. The policy will pay up to the “actual cash value” of the boat at the time that the claim is made (whether for full loss, like theft, or partial loss like collision damage).
Let’s use the same example. Even though you insured the boat in 2004, the claim in 2008 will mean that your boat will be valued at the current 2008 rate. You will be paid in accordance with the boat’s current, up-to-date value, including depreciation and market value.
While the payout tends to be less, the upfront costs and deductibles also tend to be lower.
When deciding between agreed or actual cash value, you will want to consider your boat’s usage and condition. Owners of new, larger boats tend to go with agreed value. Those insuring a boat that has already had some depreciation often switch to cash value.
What if something happens?
If something severe happens to your boat, the first thing you should do is call the U.S. Coast Guard. This is similar to calling the police with an automobile accident. It protects you from future liability and ensures that you and other parties remain safe.
You legally must report an accident to the U.S. Coast Guard if:
- A person dies or is injured (beyond first aid)
- A person disappears
- Damage to boat or property exceeds $2,000
- Boat or equipment are lost/stolen
After you have called the Coast Guard, it’s time to file a claim. Although it is not legally required to carry proof of insurance on your boat, it’s a huge help to have it on hand in case of emergency. Always know the types of coverage you have, so you know how to approach a situation in accordance with your insurance. For example, if you do not have salvage coverage, having your boat towed could cost you a significant amount of money out of pocket.
But accidents don’t just happen in the water! Transporting and storing your boat on land also calls for insurance. Although it can depend on your state, generally when a boat is out of water, it is not covered by marine insurance! If your boat is hitched to your car or truck, it is then covered by your auto policy. If it is parked on your property, your homeowners’ insurance will often trump the boat insurance.
How much should you pay for boat insurance?
You want to ensure you get all the coverage and protection you need at the correct value of your boat. So, with all this guide’s information, the main question still remains—how much should you actually be paying for maritime insurance?
Seth Miller says, “Generally speaking, most customers choose to match the liability coverage they have on their Auto Insurance Policy. If you don’t have one, the general rule is that homeowners should have at least $100,000 per person, $300,00 per accident for bodily injury liability, and $50,000 for property damage liability.”
With these and other types of coverage, the cost of boat insurance can highly vary. Your needed insurance, and thus your cost of insurance, will depend on the vessel type, the types of coverage, the value of coverage, the company, and even the state you live in. Average maritime insurance ranges from $75 to $500 per year or 1.5% the insured value of the boat—although this can vary.
The best thing you can do is consult with an agent one on one. It’s never too early in the season to get a quote and protect your greatest seaworthy asset.
Boat Insurance Bottom Line
This guide equips you to walk into a conversation with your insurer with a better understanding of what you need to protect your boat. The more information you have available, the easier and simpler the process will be.
Don’t be left high and dry without proper boat insurance! InsuraMatch will make it easy for you to quickly find the right coverage, so you can go out and enjoy the water, the sun, and your boat without worry!