It's often the last thing boaters think about when purchasing a new or used boat. And yet, it's probably the most important item on the checklist: boat insurance. That's especially true for those who finance, since lenders typically require proof of insurance before approving a loan.
But shopping for boat insurance isn't like buying auto or homeowner's insurance, experts warn. While these policies are fairly consistent in form, boat-insurance coverage varies widely depending on the company you're dealing with. "There's no standard policy, so the opportunity to have a loss that might be covered by one company totally excluded by another one or partially covered is very real," says Jim Nolan, vice president underwriting marine insurance at BoatU.S.
Whether you trailer your boat and/or keep it at home versus a marina will impact your insurance policy.
So how do you ensure what should be covered will be covered? And where do you begin? This primer should get you started.
EXPERIENCE AND STABILITY
Above all else, Nolan says, experience counts when you're evaluating an independent agent or insurance provider. So, the first piece of advice he and other marine-insurance experts offer is to be sure the company and the agent understand boating.
"There are plenty of agents out there who sell auto insurance and life insurance and sell one or two marine-insurance policies a year, but they may not be up to date with what's going on in the industry and who the best players are or what the actual coverages are," Nolan explains.
The best place to start, naturally, is with fellow boaters. Ask friends, acquaintances or other boaters at the dock who insures their vessels. If you're new to boating and don't have friends who participate, ask an agent to refer you to boaters he/she works with. Yes, you'll get only the preferred list, so ask for plenty of them. A confident agent who's not afraid to provide 10 or more names of satisfied boating clients probably has a solid reputation.
Also, find out how long the agent has written marine insurance, and be sure they're experienced with the type of boat you're buying. Some agents specialize in sailboats, others wooden boats or even go-fast boats; still others specialize in large yachts measuring more than 60 or even 80 feet in length.
BOAT TYPE AND COVERAGE
Boating varies in more ways than you can slice and dice an onion. Not only does it change from region to region, but it also differs from one body of water to the next. And, of course, there are the many types of boats available – and many ways to use them.
Not surprising, then, boat-insurance policies have to be tailored to the needs and uses of the owner. They will vary depending on where you live, the type of boat you own, whether you're trailering your boat or docking it at a marina and, naturally, whether you're boating on a lake, river or ocean.
Regardless of where you boat or what type of vessel you own, Nolan and other insurance professionals recommend that you consider a stand-alone policy. Some boaters add a rider to their homeowner's insurance that covers their boat. But these policies often limit coverage for marine-related risks, such as salvage, wreck removal, pollution or environmental damage. Stand-alone policies typically cover the boat and these related risks.
Don't use your homeowner's insurance policy to cover your boat. Instead, get a stand-alone policy.
Boat insurance also can be written to cover all risks associated with boating or specific types that are spelled out. The all-risk name is a bit misleading, say the experts. While it offers the broadest coverage available, it can limit coverage in certain areas, so read your policy carefully. Name-peril policies are, as the name implies, are policies that specify the coverages that are included and, more important, those that are not.
"You want an all-risk policy because no one can think of all the things that are ever going to happen to a boat," Noland says.
Beyond that, boaters should understand any exclusions in the policy. Consider something as simple as theft. Some companies cover only thefts where there is a physical entry to the boat and removal of property that is part of it. So items that are not attached and simply left out of the policy may not be covered.
Another important thing to consider is whether the policy will cover the "agreed value" or "actual cash value" of your boat. The major difference between the two is how depreciation is handled. Agreed-value policies typically cost more, but they cover whatever value you and the insurance provider set for your boat. In the event of a covered loss, the insurer will pay you directly and may likely replace most items on board with new ones. In the event of a covered total loss, the policy pays up to the agreed value for the replacement of the boat.
Actual-cash-value policies factor in depreciation and pay the value of the boat based on its age, use, condition and other factors.
OTHER TYPES OF COVERAGE
Nolan says another often-overlooked factor when purchasing boat insurance is coverage for environmental or marina property damage that can be caused in an accident. "For a boat that is being kept at a slip, there may be parameters where you will be contractually liable," he says.
