How to protect yourself and your family if you own a boat!
They are called pleasure boats or pleasure crafts, but, let's face it, sometimes they're a "pain." They are expensive, to say the least -- and potential danger comes with the pleasure.
After your home and maybe your car(s), your boat is quite possibly your most valued asset. It's true: you can choose to own and operate a boat, yacht or personal watercraft without insurance. But some marinas and yacht clubs won't let you dock your craft unless you have coverage.
However, that's not a very smart choice.
If you have a homeowner's insurance policy you may have some coverage for your watercraft but it is very, very minimal. A typical homeowners policy may pay up to $1,000 or $1500 to repair damage to your boat, but -- guess what? -- that damage has to occur while the boat is at your home.
That is not exactly the kind of coverage you need on a watercraft. In addition, there may be some liability coverage, but it depends on the size of your engine --- normally only outboard engines of 25 hp or less.
You could gamble and not buy insurance for your watercraft, but that's a big gamble. You're risking not only losing or severely damaging the boat in an accident, but possibly your other assets if your boat causes damage and/or injuries to other boats and/or boaters.
Lots of Options...How to Choose
First, you need to know that there are three types of "boats."
Anything less than 16 feet long is usually called "personal watercraft" by most insurers. This includes Jet Skis and Waverunners.
"Boats" are 16 feet to 25 feet, 11 inches.
Anything at least 26 feet long is classified as a "yacht."
You will find that insurers have varying appetites for these types of watercraft. For this insurance, smaller is often not better. In fact, personal watercraft tends to be more accident-prone than most kinds of boats and yachts.
Some insurers won't provide coverage for your personal watercraft at all or will only provide coverage if it is part of a larger policy. Your policy should include coverage for injuries to you and your passengers, the craft itself, liability (for damage and injuries to other crafts and people) and theft.
* Note. If you use your watercraft for water-skiing, make sure you get coverage for this exposure as well. (Depending on the insurance company, it may not be automatically covered.) You can also get coverage for the trailer(s) you use to transport the watercraft.
Insurance for Powerboats, Sailboats
In the insurance world, "boats" are usually smaller powerboats and sailboats. Standard policies for boats cover damage to the craft, including damage caused by fire, lightning, theft, vandalism, collisions, and windstorms.
The coverage is usually available for the boat itself, outboard motor(s), the boat's trailer and personal property on the craft that is part of the normal operation of the vessel. Some insurers offer separate coverage for fishing equipment.
Depending on the insurance company and the age of your boat, you may find a variety of settlement options in the event that your boat experiences a total loss. The best coverage is "replacement cost" where the company will buy you a similar brand new boat. Other options include "agreed value" where you and the insurance company agree in advance what the settlement value will be in a total loss, and "actual cash value or ACV" where the insurance company will pay the fair market value of the boat at the time of the loss up to a specified rating base.
The standard boat policy also provides liability coverage, which is usually offered in increments of $100,000 to as much as $1 million. Therefore, it is similar to auto insurance liability in terms of what is available.
Most boat policies also cover medical expenses incurred by you, your family and any other passengers onboard. Some policies also provide coverage for injuries caused by uninsured boaters or by boaters who don't have enough insurance. If this sounds like uninsured motorist coverage in an auto insurance policy, it basically serves the same purpose.
Insurance for Yachts
If your watercraft is 26 feet or longer, you may need to buy yacht insurance, which provides basically the same coverage as boat insurance, but the policy terms (or vocabulary) are different. Under a boat policy, coverage for damage to the craft is called "physical damage."
Under a yacht policy, the boat is referred to as "hull." Liability coverage under a yacht policy carries the name "property and indemnity," which insurance people often abbreviate to P&I. As with boat liability coverage, P&I is available in increments of $100,000. Depending on the size of your craft, you can buy P&I limits from $300,000 to as much as $50 million.
The cost of your boat or yacht policy is based on a variety of factors: horsepower; how fast it moves (it can cost as much as 50% more to insure a speedboat than it does a sailboat of similar size); where it is to be used; age of the craft and experience of the vessel's operator.
Like boating itself, watercraft insurance is not cheap. As such, it truly pays to shop around. There are a lot of different policies and coverage options available. Some policies might be significantly cheaper than others, but they don't offer the coverages you need.