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.
