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Boat Insurance Basics

by Lori Wolak


We all spend a lot of time selecting the boat we are going to enjoy. We pore over glossy brochures, go to boat shows, and look up the manufacturers on the Internet. We visit the sales showrooms, and debate over the width, length and every little detail of all the different boats we see. We want to make sure we choose the one that best fits our lifestyle and family. But when it is time to choose insurance for the boat, we usually just sign up for the first company we see that provides it. Maybe we are spending too little time on this critical detail.


Are there real differences between insurers when it comes to boats? A recent news story about a boater whose insurer declined to pay damages when he was found criminally negligent made me wonder. Are there other ground rules and loopholes we should be aware of in our boat insurance? God forbid, but if we should ever need to use the insurance, hopefully we won't be unpleasantly surprised. I decided to use some of the winter downtime to find out more.


What I have found out is the laws, boating regulations and insurance policies are different for each state and from company to company. And that the old saying 'buyer beware' was never more true than when it comes to insurance! If you are not sure what your current policy covers, I recommend you take it out and review it after you read this article to make sure you have the coverage you need. Make sure you understand policy types, coverage limits and the limitations of your coverage before something happens to either your boat or your passengers.


The case I read about was pretty widely publicized. The U.S. Court of Appeals for the First Circuit ruled that the "policy exclusion for criminal conduct embraces acts of negligence and not just intentional criminal acts." Which boils down to, the insurance company does not have to pay any damages or wrongful death civil suit costs. I can understand that this is a reasonable stance by the insurance company. They should not be liable for something someone purposely did. That would equate to someone burning down their home on purpose and expecting the insurance company to pay.


However, there are more subtle differences that you should be aware of that can affect your ability to replace or repair your boat should it be damaged. There are basically two types of boat coverage to consider, agreed value or stated value and actual cash value. Agreed value policies require agreement between you and the insurance company on the value of the boat hull and everything attached to it. If you add a tower or other accessories at a later time, make sure you add these to the policy or they won't be covered. An actual cash value policy takes depreciation into account, and gives the insurance company the option of replacing the boat with a like boat, or giving you the cash. While the agreed value policy might be better if your boat is a total loss, it might not benefit you most if you experience a partial loss. This is because the deductible is going to be a percentage of the value. A higher value means a bigger deductible.


Some policies have exclusions that limit what kinds of damages will be covered. They can exclude damages by underwater objects as well as freezing. What boat owner in their right mind would have a policy that won't cover damage from underwater objects? Do you know if your trailer is covered or not? Some policies wont cover it if it isn't listed. Not every boat accident happens in the water.


Another issue which will greatly affect payout on an accident is liability. There are two main types, split limit, and protection and

indemnity. Split limit might be set up as 50/150/50. If you had this coverage and had an accident, you would have $50,000 in coverage per person, $150,000 in coverage per occurrence and $50,000 in coverage for property damage. So if you have five people involved in the accident, you only have $150,000 in coverage to split between those five people. That's only $30,000 each. With this type of coverage, the more passengers involved, the lower the covered amount is per person. Protection and indemnity means there is a single dollar limit for liability and property damage combined. Do you know if your coverage includes towing liability? Towing liability covers anything being pulled by your boat - pretty important for boat owners today!


Some policies cover emergency services if needed. You might be able to get an umbrella policy. It will pay for damages for which you are deemed liable after all other policy limits are exhausted. Pollution liability should also be considered. If your boat sank, you might be held liable for cleaning up the oil, gas and other contaminants it released into the environment. You should also know if your policy has any navigation limits that could affect you. Water depth, and what states you are covered in would be explained in the navigation limits.


There are more details to consider, such as lay up period and operators, depending on your individual needs. The best way to be sure you have the coverage you need is to find a reputable insurance firm and have them review your policy with you. The time to make sure you have the right coverage is before you need it! So, start off the new year by making sure your coverage is really what you think it is. Safe Boating!


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