Understanding Boat Insurance: Coverage And Claims Process

Boat insurance is a financial safeguard that covers damage to your watercraft and provides liability coverage for injuries or damages caused to others while boating. It is separate from homeowner's insurance, which often does not cover marine-specific risks. Boat insurance policies vary, but they typically cover the hull, machinery, furnishings, and any equipment that is permanently attached to the boat. Some policies also offer additional coverage, such as on-water towing, fuel spill liability, and wreckage removal. When determining the rate for boat insurance, insurers consider factors such as the value, length, and age of the boat, the type of boat and engine, and the boating experience of the owner.

Physical damage and liability

The liability section, sometimes referred to as Protection & Indemnity, covers your legal obligations to third parties. This includes bodily injury or loss of life, as well as damage to someone else's property, resulting from the ownership or operation of your boat. Liability coverage also helps pay for your legal defence if you are sued for a covered incident.

Liability coverage for boaters typically includes bodily injury liability, medical expense coverage, property damage liability, and claim and defence expenses. Bodily injury liability covers the costs associated with injuries to other people that you are responsible for, including medical expenses, hospital stays, and rehabilitation. Medical expense coverage provides compensation for bodily injury sustained in an accident, regardless of who is at fault. Property damage liability helps cover the cost of damage to another person's boat, dock, or other property. Claim and defence expenses cover the legal costs if a lawsuit is filed against you.

Boat insurance policies offer liability coverage for damages or injuries you are liable for while boating, up to specified limits. This includes damage to another watercraft or injury to someone on or near your boat, if you are found to be legally responsible. Liability coverage can also provide an additional financial safety net through umbrella liability insurance, which offers extra protection if the cost of a claim or lawsuit goes above your primary liability limit.

Agreed value vs actual cash value

When it comes to boat insurance, there are several factors to consider, including the type of coverage, the extent of protection, and the cost. Two key types of coverage are "Agreed Value" and "Actual Cash Value" (ACV).

Agreed Value policies typically provide broader coverage and offer peace of mind by guaranteeing a predetermined payout in the event of a total loss. For instance, if you have a boat insured for $10,000 under an Agreed Value policy and it is deemed a total loss, the insurance company will pay you the full agreed value of $10,000. This type of policy is ideal for boat owners who want the assurance of a fixed payout without considering depreciation.

On the other hand, Actual Cash Value policies are more economical and provide coverage based on the current market value of the vessel at the time of the loss. In the event of a total loss, the insurance company determines the value of the boat, taking into account factors like depreciation and its condition. For example, if your boat is insured for $10,000 but the insurance company assesses its value at $8,000, they will pay $8,000 in the event of a total loss. This type of policy is suitable for boat owners seeking a more affordable option.

It's worth noting that the treatment of partial losses differs between the two policies. Under an Agreed Value policy, partial losses are generally settled on a replacement cost basis, excluding physical depreciation. However, certain items prone to higher wear and tear, such as sails, trailers, and machinery, may be subject to depreciation adjustments. In contrast, ACV policies factor in physical depreciation for partial losses, resulting in reduced payouts for lost or damaged items.

While Agreed Value policies tend to be more expensive due to their comprehensive nature, ACV policies offer a more cost-effective solution for boat owners. It's important to carefully consider your specific needs and preferences when deciding between these two types of coverage. Consulting with an insurance professional can help you make an informed decision about which policy is best suited to your circumstances.

Comprehensive and collision coverage

Comprehensive coverage protects your boat from damage caused by events outside of your control, such as collisions with animals, docks, or other watercraft and objects. It also covers damage from theft, vandalism, fire, hurricanes, flooding, and hail.

Collision coverage, on the other hand, specifically protects against damage caused by collisions with other watercraft or objects.

The decision to add these coverages depends on factors such as your financial situation, personal preferences, and the actual cash value of your boat. If your boat has a high cash value and you cannot afford to repair or replace it in the event of damage or loss, comprehensive and collision coverages may be critical additions to your policy.

It is important to note that comprehensive and collision coverages do not include protection for regular wear and tear, infestations, damage from marine life, manufacturer defects, or ice and freezing damage.

Uninsured/underinsured boater coverage

This type of insurance is important because, unlike with cars, boaters are not required to have insurance for their boats. In fact, only two states—Arkansas and Utah—require insurance for obtaining a boating license. This means that if an uninsured boater damages your boat or injures you or your passengers, they may not have the financial means to compensate you. Uninsured boater coverage will ensure that you are not left footing the bill in these situations.

It's worth noting that uninsured boater coverage typically does not cover non-boating property, such as docks, piers, or boat trailers. These claims would usually need to be filed under your vehicle or property insurance. Additionally, most policies only cover collisions and not intentional damage, so if your boat is vandalised or stolen while docked, this may not be covered.

When considering uninsured boater coverage, it's important to assess the value of your boat, the level of risk you're exposed to while boating, and your general financial situation. If replacing your boat or paying large medical bills would cause financial strain, then uninsured boater coverage can provide valuable peace of mind.

Medical payments coverage

Medical Payments are "Goodwill" payments, made without any legal action being brought. They are often reimbursed to the boat owner or paid directly by the insurance carrier. As the boat owner, if someone is injured on your boat or as a result of your boat, you should take care of that person's injuries and then promptly contact your insurance carrier or agent to report the incident.

Given equal amounts of insurance, coverage on a "per person" basis may be preferable to coverage on a "per accident" basis. It is also important to ascertain whether injuries to you and your family are included in this coverage.

Frequently asked questions