 |
 |
 Boat
owners often assume that their homeowners insurance provides complete protection for their
vessel. Unfortunately, many learn the hard way -- after a loss occurs -- that their
homeowners offers only limited property and liability protection to boat owners. In
fact, the basic homeowners policy only provides about $1,000 of physical damage protection
for small boats.
Even with the Hull Coverage endorsement (an optional add-on
coverage to a homeowners policy offered by some companies such as Travelers) boat owners
can only receive up to $7,500 for covered losses (in most states). Plus, the policy
settles on an actual cash value basis only. Often this is just not enough to repair your
boat. If you have made the investment to own and operate a boat, you may need the full
range of protection offered by boat insurance.
What types of boats qualify?
Most boat insurance programs are designed to cover boats from 16' to 25' 11" in
overall length. Boats eligible for this insurance must be valued at $3,000 or higher and
include outboard powered boats, inboard powered boats, sailboats (with or without power)
and outdrive powered boats. Non-powered boats (such as canoes, rowboats, and pedal boats)
are also eligible but only for inland water use.
If the size of your vessel is 26 feet or greater, it's generally considered a yacht,
and therefore qualifies for yacht coverage.
Physical Damage coverage
This important coverage pays to repair your boat if it's accidentally damaged or destroyed
by a covered peril (such as fire, theft, windstorm, lightning or vandalism). Physical
Damage coverage is very broad, with a few exclusions such as wear and tear, dishonest,
illegal, intentional or fraudulent acts.
When you purchase boat insurance, one of your primary objectives is to protect your
investment. Boat insurance can provide coverage for your:
- boat (including machinery)
- outboard motors
- auxiliary equipment
- dinghy (if under 16 feet and under 25 h.p.)
- boat trailer
- personal property kept aboard your boat.
What's more, you're usually covered for 12 months navigation anywhere within the 48
contiguous United States and Canada. You're also covered while your boat is in transit
over land anywhere within the 48 contiguous United States and Canada.
Agreed Value (used for a Total Loss)
Boats under 15 years old are typically insured on an agreed value basis. This means the
company will pay you the full amount for which your boat is insured in the event of a
total loss. The agreed value is the amount that is shown on the policy and there is no
deduction for depreciation.
Like cars, a boat's market value decreases over time. For this reason, the most you are
allowed to insure your boat for is its fair market value. In most cases, insurance
companies re-evaluate the market value of the boat every three years. Therefore, the
agreed value listed on your policy will more closely reflect the current market value of
your boat as it ages.
New for Old (used for a partial loss)
In the event of a partial loss, where there is less serious damage, property claims are
handled in the following way: damaged property is repaired or replaced with no
deduction for depreciation. In other words, "new" equipment replaces
"old" damaged goods. Your policy should tell you how your insurer will settle
claims for repairs or payment.
Actual cash value (used for boats over 15 years old)
Actual cash value means you will be paid the market value cost of your boat minus
depreciation. Once your boat is over 15 years old, most boat policies revert to settling
losses on an actual cash value basis. Also, some policies only offer actual cash value for
certain damaged property such as sails, protective covers, batteries, outboard motors,
lower drive units or outdrives, dinghies and trailers (regardless of the age of the boat).
What's not covered
- Non-conventional watercraft like: hydrocycles, jet skis, kit boats, ski boats, etc.
- High-performance boats with advertised or design speed in excess of 50 MPH.
- Auxiliary equipment such as:
- Outboard motors NOT listed in your policy
- Moorings, cradles, boat lifts or similar equipment
- Fishing tackle and scuba gear (however, most policies do offer protection for this
equipment as a low-cost, optional coverage)
- Personal effects. This includes items not intended for the normal operation of your
boat, such as portable TVs, cellular or portable phones, stereos, radios and cameras. For
example, tools stored and used only in your boat may qualify as covered auxiliary
equipment, whereas the same tools left in your car are considered to be personal effect
Deductibles
A deductible is the amount of risk that you are willing to assume in case of a loss. The
higher your deductible, the lower your insurance premium. Boat deductibles are usually
determined as a percentage of your coverage and can range from 1% to 10%, depending on the
type and speed of the boat. For example, if your deductible is 1% of $20,000 of coverage,
you would pay the first $200 of the loss. When selecting the deductible on your policy,
consider how much financial loss you are willing to assume. Also consider how much premium
you could save by choosing a higher deductible amount. A lower deductible of $100 may be
available for special equipment such as boat trailers, personal effects and dinghies.
Boat Liability
This important coverage protects you if you are legally responsible for damages to
property or injury to someone other than yourself or a family member. Boat liability
coverage protects you in the event you are sued as a result of hitting another boat, or if
someone is hurt onboard your vessel because of your negligence. This coverage is usually
offered in increments of $100,000 up to $1 million.
Additional coverages
The following additional coverages may be offered as part of your basic boat policy:
- Uninsured Boat Coverage:
pays for injuries caused by an accident that you are
entitled to recover from the owner or operator of an uninsured boat. This also applies in
situations involving an unidentified "hit-and-run" boat.
- Medical Payments:
covers reasonable medical, ambulance and hospital costs should
someone be injured while in or upon boarding or leaving your boat.
- Commercial Towing and Assistance:
You are reimbursed for the reasonable costs
incurred when you break down at sea and need a commercial tow to port.
- Agreed Value on Outdrives (lower limits):
provides replacement of lower drive units
(without deduction for depreciation) if damaged or destroyed by a covered peril.
Optional, low-cost coverages
The following separate coverages can complete your protection:
- Optional Fishing Equipment:
fishing tackle and equipment are not covered in the
basic boat policy. You may want to specifically cover this property if you have some
expensive rods, reels or tackle.
- Increase the limits offered
for personal property, uninsured boater coverage and
commercial towing.
Inspection surveys
Inspection surveys are strongly encouraged to prevent injuries and maintain the
safest of boating conditions. This is especially important for older boats powered by
gasoline because gas vapors can be extremely dangerous. As boats get old, fuel
lines or connections can wear out causing gas vapors to escape and settle at the bottom of
contained areas. Any spark can set off an explosion.
- Consider installing a vapor detector in your engine compartment...these low-cost devices
can warn you of gasoline vapors in the engine compartment.
- Inspect your boat on a regular basis, especially your electrical and fuel systems, and
your safety equipment (such as fire extinguishers and personal flotation devices).
Premium Discounts
Some companies demonstrate their commitment to safe boating by offering a premium discount
for policies where all the operators have successfully completed a Power Squadron
or Coast Guard Auxiliary basic or advanced seamanship course. Copies of certificates are
required. Newer boats also benefit from lower premium rates.
There's nothing quite like the thrill
of sailing. But, it takes hard work, planning and a devotion to detail to stay on the
right course. That's why you pay attention to storm warnings, read the currents, and most
of all, carry yacht insurance.
The following pointers will help you navigate through the details of yacht insurance:
What qualifies as a yacht?
If your vessel is over 26 feet, it's considered a yacht for insurance purposes. Most
cruisers, sailboats and sportfishing vessels fall under this heading. If your vessel is
under 26 feet, it probably qualifies for Boat Insurance.
There are two major coverages that yacht insurance policies (like the Travelers
Commodore Yacht program) provide: hull coverage protection for your property and
Protection & Indemnity liability protection.
Hull coverage
This important coverage pays to repair your yacht if it's accidentally damaged or
destroyed by a covered peril (such as fire, theft, windstorm, lightning or vandalism).
Hull coverage is very broad, with a few exclusions such as wear and tear, dishonest,
illegal, intentional or fraudulent acts.
Your policy should include coverage for machinery, outboard motors, spars and sails,
equipment, apparel and furniture. Equipment generally includes both permanently attached
items (such as ship to shore radios, Loran systems and similar electronic and navigational
gear) as well as auxiliary equipment such as deck chairs, binoculars, lifejackets and
similar items normally used to operate or maintain your yacht. Your dinghy and trailer can
also be covered (to do so, this equipment must be scheduled -- or listed -- on your
policy). However, many companies automatically cover dinghies that are under 16 feet and
25 h.p.
Agreed Value
Yachts are typically insured on an agreed value basis. This means the company will pay you
the full amount for which your yacht is insured in the event of a total loss. The agreed
value is the amount that is stated on the policy.
Like cars, a yacht's market value decreases over time. For this reason, the most you
are allowed to insure your yacht for is its fair market value. In most cases, companies
re-evaluate the market value of insured yachts every three years. Therefore, the agreed
value listed on your policy will more closely reflect the current market value of your
yacht as it ages.
Deductibles
A deductible is the amount of risk that you are willing to assume in case of a loss. The
higher your deductible, the lower your insurance premium. Deductibles are usually
determined as a percentage of your hull coverage and can range from 1% to 10%. For
example, if your deductible is 1% of $100,000 of coverage, you would pay the first $1,000
of the loss. When selecting the deductible on your policy, consider how much financial
loss you are willing to assume. Also consider how much premium you could save by choosing
a higher deductible amount.
Protection and Indemnity (P&I)
This primary coverage is similar to the liability protection you receive as part of your
homeowners coverage. P&I protects you if you are legally responsible for damages to
property or injury to someone other than yourself or a family member. P&I can protect
you in the event you are sued as a result of hitting another yacht or other sea-faring
vessel, or if someone is hurt onboard your vessel because of your negligence. This
coverage is written only in conjunction with hull coverage and is not subject to a
deductible. It's usually offered in increments of $100,000 up to $1 million or more.
Jones Act coverage
If you employ a captain or crew member, make sure your P&I includes Jones Act
coverage. This is a maritime form of worker's compensation coverage which will protect you
if one of your employed crew members is injured on your yacht.
Additional coverages
The following additional coverages are offered as part of your basic yacht policy:
- Uninsured Boat Coverage:
pays for injuries caused by an accident that you are
entitled to recover from the owner or operator of an uninsured boat. This also applies in
situations involving an unidentified "hit-and-run" boat.
- Medical Payments:
covers up to $1,000 for reasonable medical, ambulance and hospital
costs should someone be injured while in or upon boarding or leaving your yacht.
- Commercial Towing and Assistance:
You are reimbursed for the reasonable costs
incurred when you break down at sea and need a commercial tow to port.
Optional, low-cost coverages
The following separate coverages can complete your protection:
- Hurricane Protection endorsement:
shares the costs you incur (up to $500 per
occurrence and $1,000 per policy term) if you:
- haul your yacht out of the water because the National Weather Service has issued a
hurricane watch or warning for your moorage location. (The resulting costs to relaunch
your vessel once the watch or warning has ended are also included.)
- hire a qualified, professional captain to navigate your yacht to safe harbor as a result
of a hurricane watch or warning.
- Optional Fishing Equipment:
Since most companies do not include fishing tackle as
auxiliary equipment, you may want to specifically cover this property if you have some
expensive rods, reels or tackle.
- Increase the limits offered
for personal property, uninsured boater coverage and
commercial towing.
Warranties or limits
Some restrictions may apply to your policy. Here are some examples:
- Pleasure Use Warranty:
Most yacht policies require that your yacht be used for
pleasure and recreational boating activities only. Coverage for any business use, such as
chartering, must be added to your policy (specifying bareboat or captained charter
operation) and usually involves an additional cost. Using a yacht to entertain business
clients is generally considered to be "pleasure use," provided no money changes
hands.
- Navigational Warranty:
Most policies restrict the operation of your vessel to
defined navigational territories or specific geographic areas. Some examples: New England
waters, Great Lakes, inland lakes and rivers, or the Atlantic or Pacific coastwise waters.
- Lay-up Warranty:
Some policies are written with a lay-up period in areas where the
boating season is limited. For a lower premium, yachts must be "laid up and out of
commission" for specific dates on land or in the water, in accordance with the
customs of local boat yards. Lay-up means a yacht cannot be used for any boating
activities during this period. This warranty makes great sense in Northern climates where
boating is hazardous during the winter months. You "winterize" between December
1 and April 1 (time that you wouldn't be sailing anyway!). This way, you don't have to pay
for coverage you don't need. A lay-up warranty does not prohibit having work done provided
the vessel remains in its lay-up location.
- Seaworthiness Warranty:
Most yacht policies provide an all-risk type of coverage,
intended to cover loss or damage resulting from an accidental or fortuitous situation,
excluding any loss for wear and tear or gradual deterioration. This type of warranty
states that the yacht must be maintained in a safe and seaworthy condition in order for
insurance to be offered.
Marine Surveys
Prudent yacht owners should periodically have their crafts surveyed by a qualified marine
surveyor. Although there are some costs involved, these inspections go a long way toward
protecting your investment (resulting in potential long-term savings), as well as ensuring
the safety and well-being of those aboard and around your yacht.
Surveys can identify conditions or potential problems which, if not corrected, could
spell disaster. Surveyors also occasionally find damage you were not aware of, and which
may be covered by your insurance policy!
Most insurance companies require that a marine inspection survey be conducted on yachts
every five years.
Premium Discounts
Some companies demonstrate their commitment to safe boating by offering a premium discount
for policies where all the operators have successfully completed a Power Squadron
or Coast Guard Auxiliary basic or advanced seamanship course. Copies of certificates are
required. Newer boats also benefit from lower premium rates. |