While it sounds like the same thing, buying boat insurance is an entirely different animal from buying car insurance or a homeowner’s policy. Here’s the lowdown on properly insuring your boat.
There are only two ways you can be sure you are getting the best insurance policy for your boat: Pick the best underwriter and pick a knowledgeable agent. It’s just that simple. Most important, do not let price enter into the search. At the end of the day, the extra bucks don’t mean a thing when your boat hits a rock.
For example, I know of a very well-heeled guy whose four-year-old $81,000 boat was continually serviced and pampered by a first-class yard. Money was never an object. Circumstances developed in which the boat was wrecked, not due to anything he did wrong. His insurance company, a well-known underwriter, refused to pay off, saying that it wasn’t properly maintained.
It took him a year of persistent pestering, cajoling and threatening before it finally paid him the policy’s “agreed value” plus an additional $3,000 for accumulated expenses.
Another guy made the unfortunate mistake of assuming that his longtime friend who handled his home and auto policies could also write a policy for his boat. Wrong. The policy as written did not take into account one of the basic caveats of marine insurance: “agreed value” as opposed to “actual cash value.” To his dismay and surprise, when his $100,000 boat sank, the company offered him $68,000 because that was the value at the time of the incident. When choosing an agent for marine insurance, that person should have familiarity with boats as a bare minimum and, more important, represent a recognized, well-respected marine insurer.
How do you effectively find the right underwriter and agent? Between the yacht club/marina bar, the boatyard and the Internet, you should be able to come up with the right combination. Ask the guy who handles your personal policies (health, auto, business) if he has experience with boats or if he knows someone who does. Chat up the owner/manager at your yard and find out which company pays the best with the least hassles. Visit as many online forums as possible and see what everyone is saying — good or bad — about a broker, agent or underwriter. Post your own inquiry on a forum that seems to be on the right page — not one with guys trying to be funny or letting off uncontrolled steam. The information is out there, and it’s up to you to do your homework.
Here are some of the things you should be looking for when purchasing a policy. If you plan to leave your “home” cruising grounds, be sure you’re covered. This is especially true if you plan foreign cruising to the Caribbean, Canada or Mexico. You might need an endorsement. Look for an arbitration clause under the claim settlement section. It’s your guarantee that, when you get into a difference of opinion, you’ll have a third party to help make a fair call. See what the deductible is and if it varies depending on the claim issue, like hurricane coverage. Understand what salvage is and how if affects your claim.
Your boat is possibly the second-largest investment you’ll ever make. Take the time to explore and understand your insurance options, and remember, price should not be the issue.
Does everyone need insurance? Yes … and no. At some point, insuring a boat is just a waste of money. As the value of the craft approaches the cost of the annual premium, it’s time to re-evaluate. Even so, you should never be without adequate liability insurance. Accidents do happen, and you could be in a situation in which someone is seriously hurt or you caused major damage to another boat or facility. A minimum coverage of $500,000 is recommended, and based on your individual situation, it could be considerably higher. We live in a litigious society, and your agent should be able to suggest realistic and meaningful coverage to keep you protected in case of an accident.
Quick Tip: Do you live in a hurricane area? If you do, your insurance provider may expect you to present a contingency plan for removing your boat. Make sure your policy is clear on what damages it will pay for from a weather event.