Insuring
your boat to protect your investment is a sound idea, however
in certain circumstances you may need to insure your boat; lenders
and marinas often require insurance. Protecting hard-earned
assets from liability exposure due to property damage or personal
injury, which can occur as a consequence of boat ownership,
is prudent.
When you want or need to buy boat insurance, how do you shop
and compare boat insurance policies?
The most common comparison is price. If you never have a claim,
price is the best comparison. However, there are many other
factors, which should be considered.
As with a new suit, the basic fit of the policy is crucial.
Your policy must cover your intended use, navigation area, season,
winter storage, and overland transportation, as applicable.
It is foolish to buy a suit that does not fit, no matter how
good it looks on the rack; and it is foolish to buy an insurance
policy that does not cover the vessel and your liability exposure
during the entire policy year.
Once you determine the size of the suit, you need to decide
the color and style. In shopping for boat insurance, the most
prudent shopper reads each prospective policy. As this suggestion
is at least, as tedious as it is comical, here are some tips.
How are claims paid?
Total losses
are paid based on either agreed value or actual cash value.
Total losses on agreed value policies pay the declared value,
or value agreed to by your insurance agent, or underwriter and
you at policy inception. Total losses on actual cash value polices
are paid based on a value established post casualty. This value
is often established by a marine surveyor hired by the insurance
company. While actual cash value policies may be less expensive,
a total loss can lead to significant and unwanted negotiations
with your insurance adjuster.
Claims are
also paid as partial loss claims. Partial loss claims are much
more common than total losses. There are a wide variety of clauses
that govern partial losses. When shopping boat insurance, the
most important aspect of the partial loss payment clause is
what components are depreciable/actual cash value versus non-depreciable/new-for-old.
Most policies will depreciate sails, canvas, upholstery, and
fabric. Many policies will depreciate external finishes, engines,
and outdrives. Some policies pay actual cash value or apply
depreciation to everything. In the case of a partial loss on
an older boat, depreciation can significantly reduce your recovery.
Discern what is covered. Most boat insurance policies are “All
Risk”. This means that virtually every loss is covered,
unless it is specifically excluded in the policy. Whether the
exclusions are in the form of responsibilities, insuring conditions
or specifically stated exclusions, insurance companies generally
require normal and prudent maintenance. Specific exclusions
generally include wear and tear, gradual deterioration, corrosion,
and lack of maintenance. Some policies exclude mechanical breakdown,
freezing damage, and latent defects.
In conclusion, to choose what boat insurance policy to purchase,
consider price, basic coverage and total/partial loss payment
methods. There are other “bells and whistles”. Some
policy options include personal effects coverage (check limits),
towing (check limits), uninsured boaters coverage, pollution/fine
coverage, and deductible amounts.
Another important decision when buying insurance is making the
choice between a local independent agent or “a direct
writer” with whom correspondence is generally by mail
and telephone. The difference is analogous to buying a suit
from Nordstrom or Nordstrom Rack. The suit from Nordstrom comes
with a helpful and courteous professional; Nordstrom Rack offers
a better price. Both sell quality products. The local marine
insurance agent can perform that tedious process of reading,
screening and clarifying the policies, and therefore provide
the best fit, color and style. An independent agent can assist
if and when a claim arises. This local assistance, personal
service and expertise comes with a premium. Direct writers offer
discounted rates that can be significant.
Local independent insurance agencies represent many insurance
carriers. Most of the carriers represented by the independent
agents are domestic (USA companies) and many are regulated by
the California Department of Insurance.
Some insurance agencies carry specialty lines of insurance,
which are most applicable to unusual vessels, extended navigation
limits and commercial risks. Some of these specialty line carriers
may not be domestic or regulated by the California Department
of Insurance. However, if the agent is trustworthy, the risk
of buying an “unregulated” policy is small and many
“special needs” can be met.
