If you lost or sustained damage to your boat due to an accident, fire, storm or lawsuit, you want to have the appropriate coverage to replace or repair the boat to use again. Although homeowners policies may provide some coverage for small boats, it is usually very limited with coverage as low as $1,000 to pay for physical damage to a boat, outboard motor, trailer and accessories. In addition, if you are in an accident with damage to any other property or if anyone is hurt, you are liable for the costs of all damages.
This information is intended to describe insurance for boats for private pleasure use and not used for commercial purposes. If you are interested in insurance for commercial operation of boats, contact your insurance producer to discuss other insurance, including marine insurance.
Why Buy Boat Insurance?
Boat insurance is financial protection to cover you and your loved ones from the costs of unexpected events damaging your boat, such as natural disasters, including hurricanes, or the costs you may be liable for due to boat-related accidents, such as collision with another vessel, a swimmer, or water skier that may lead to property damage or bodily injury claims.
While boat insurance is intended to address the costs of unexpected damages beyond your reasonable control, it is not intended to pay for routine maintenance or expected repairs you need to maintain your boat such as the cost of replacing worn out decks.
There is no law in Massachusetts requiring that you purchase insurance for your boat, but it is prudent to consider this coverage to protect the investment you have made in your boat. If damaged, it may take many years to repair or replace your boat without the financial protection that boat insurance may provide. In addition, you are liable for all property damage and bodily injury claims that are due to boat-related accidents. Boat insurance can protect you from expensive claims related to these accidents.
You also may need to keep in mind that if you need a loan to help pay for your boat, your lender or bank may not loan you money unless you buy and maintain insurance on your boat. If you drop coverage or stop paying for it, some loan agreements permit the lender to accelerate the loan and demand immediate payment of the entire loan balance. Even though a lender may require that you have insurance, the lender cannot require you to obtain the coverage from a particular insurer and cannot require you to insure your boat for more than its value.
What Amount of Insurance Do I Need to Protect My Boat?
You should consider a coverage limit that is high enough to help you replace or repair your boat at today's labor and material costs. This cost may be very different from the market value of your boat. In addition to choosing the type and overall limits to your coverage, you will also choose a deductible level - this is the amount you will be expected to pay out-of-your pocket for covered losses before the insurer pays any claims. The higher the deductible amount chosen - and greater proportion of low-dollar claims that are your responsibility and not the insurer's responsibility - the lower the premium that you will have to pay.
Your boat's value can be looked at in three very different ways:
- Market value - represents what your boat would sell for on the market.
- Actual cash value - represents what your boat is worth today after adjusting for the normal wear and tear that may have depreciated the replacement value of the boat.
- Replacement cost value - represents the cost that it may take to replace or repair your boat if it were destroyed or damaged.
Each of these may be significantly different than the other and should not be confused in determining the amount of coverage that you may need to repair or rebuild your boat. A boat that may sell for $100,000 may actually cost $150,000 to replace. Some policies will pay for replacement cost coverage; others may offer actual cash value; and others may use an "agreed value" negotiated by both parties when the policy is issued. You should talk with your insurance producer about how much it may cost to replace your boat when considering the limits of your coverage.
If your coverage is less than the replacement cost, your insurance company is not obligated to pay to replace your boat. In the case of a total loss, the company only needs to pay up to the policy limits. For partial losses, an insurance company may only be obligated to pay a percentage of the loss based on the percentage that your policy limit would pay toward the cost to replace your entire property.
How Do I Obtain Coverage for My Boat?
Boat insurance, like auto insurance, is offered in a competitive market. You can shop around for coverage through an independent insurance producer or directly from companies available in your area. Please note that an insurance company can decide to turn down your application for coverage.
In order to obtain an insurance policy for your boat, you must fill out an application to help the insurance company learn about you, your boat, and the risks the insurance company will be responsible for if it insures you under an insurance policy, this includes any prior losses.
After reviewing the information, the insurance company will use its own standards, known as underwriting guidelines, to decide whether to issue you a policy, and the rate it would charge for any coverage it provides.
If an insurer agrees to consider your application, the producer or company may issue you an "insurance binder", a legally binding statement indicating that you have immediate protection for a specified period of time during which the company will decide whether to issue you a policy. If the company formally accepts your application, it will issue a policy, usually for a one-year period. If your application is rejected, you will need to apply to another insurer.
The surplus lines market is also available as an alternative market to provide coverage for boats that traditional carriers refuse to accept. Although surplus lines companies are permitted to issue policies to Massachusetts residents, they are not licensed by the Division of Insurance, are not regulated by state law and are not members of the state guaranty fund.
What Coverage May be Available?
There are differing combinations of coverage that may be offered to protect your boat. Most boat insurance policies are designed for boats up to 26 feet in length. Boats that are greater than 26 feet in length are considered yachts and covered under special yacht insurance.
It is important to know which risks a policy covers and which risks are excluded. Each policy protects against a specific number of perils (events that cause damage to the boat). Examples of these perils include collision, fire, windstorm, theft, lightning or vandalism. Policies specifically exclude coverage for certain events, including, for example, acts of war or damages related to a poorly maintained vessel.
In addition to knowing the risks or perils covered, it is important to consider the expenses that are covered in the event of a covered peril. Each policy usually contains coverage for the following:
- Property damage to your boat
- Typically, a boat insurance policy includes coverage for damage to watercraft and can include outboard motor boats, inboard boats, stern drives, jet drives, sailboats, houseboats, jet skis and boat equipment used to transport the above. The coverage also can include equipment that is permanently attached to the boat, such as, anchors, fuel tanks, motors, masts, depth finders, horns, lights, mooring cleats and lines, oars, two-way radios, and spars. Boat policies do not usually include coverage for personal property, such as clothing, food, jewelry, parasails, stereos and portable television, scuba and other diving gear, water skiing equipment (although some of these can be added by endorsement). Policies also usually do not cover sails, masts or spars while the boat is operating in an official race or speed contest.
- Personal liability lawsuits arising out of the use and ownership of the boat
- Most boat insurance policies include personal liability coverage to protect you against a claim or lawsuit resulting from bodily injury or property damage to others caused by your ownership, maintenance or use of the boat. Personal liability coverage limits may differ among companies and a policy may contain company-specific exclusions. You should check to determine what limit is appropriate for you.
- Limited medical payments for certain accidents occurring on your boat
- Medical payments coverage pays for any medical expenses incurred by persons other than family members and those living with you who are accidentally injured while in, upon, boarding or leaving your boat. Basic medical payments coverage limits are usually set at a low dollar amount to cover minor injuries. You may wish to check with your producer or insurance company to determine if the amount of medical payments coverage on your policy is sufficient, or whether a higher limit would be more appropriate for you.
Additional Coverages:
- Uninsured Boat Owner Coverage
- If purchased, this provides coverage for your injuries resulting from an accident that is the fault of an uninsured boat owner or "hit and run" operator.
- Personal Effects Coverage
- If purchased, this may provide coverage for your clothing, portable radios, fishing equipment, water skis or other personal item
What May Affect the Cost of Insurance for My Boat?
- Amount of Coverage: The amount of coverage you buy will affect the price you pay.
- Deductible Amount: This is the amount of loss that the covered person is required to pay before the insurance company will pay any losses. The higher the deductible, the lower the price for the insured. An insured should keep in mind, however, that deductibles apply separately to each loss that may occur throughout the year.
- Age and Condition of Boat: New or remodeled boats may have certain safety features to reduce risk while older boats may be subject to more damage in case of an accidental event.
- History of Accidents: If you have a history of boating accidents, this may be used as a factor in setting your rates, based on the likelihood of your having future accidents.
- Navigation Area and Length of Navigation Period: Where you operate your boat and the length of time you use the boat in any particular year can affect your premium.
- Discounts: Most insurance companies offer a variety of discounts, including some of the following based upon projected reduced risks for certain features:
- Multi-policy discounts for covering boat insurance and other insurance with the same carrier;
- Safety equipment, including fire extinguishers, burglar alarms and ship-to-shore radios; and
- Taking safety courses offered by the Coast Guard, American Red Cross, U.S. Power Squadron or National Association of State Boating Law Administrators (NASLAB).
How Can I Reduce the Insurance Premium for My Boat?
- Shop Around: Prices can vary greatly. However, don't consider price alone since service is also important. Quality service may cost more, but it also may be worth it. Be sure to talk to your friends.
- Raise Your Deductible: Deductibles are the amounts you may pay out of your own pocket for a loss before the insurance company pays. Although choosing a high deductible may decrease the annual premium cost, you should consider your finances before increasing the deductible beyond what you can live with.
- Shop for Discounts: Some companies may offer a discount on your premium if you have two or more policies with them.
- Include Insurance Costs in Your Budget: Before you buy a boat, think about how much it will cost to insure. Some insurers may offer discounts on new or remodeled boats because they are likely to be in better condition.
- Improve Your Security: Some companies offer discounts for fire extinguishers, burglar alarms, ship-to-shore radios or other security features.
Can an Insurer Ever Cancel or Nonrenew My Coverage?
Yes, an insurer can cancel or non-renew your coverage. You should read your policy carefully to determine the conditions for cancellation and non-renewal. Companies can cancel coverage, but only according to the conditions that are spelled out within the policy.
Do I need boat insurance if I own a personal watercraft or human-powered craft?
Personal watercraft owners can face similar personal and financial risks as with a larger pleasure boat while on the water, including incidents that result in bodily injury to you or another person, bodily injury legal costs if you are sued due to an accident, or property damage to another boat or dock.
Personal watercraft or PWCs (known by brand names like Jet Ski) or human-powered craft (canoe, kayak) may be covered under your homeowners insurance. When deciding whether a stand-alone policy or coverage under an existing policy will cover these types of devices it is best to consult with an agent or your insurance company.
What if I Need to File a Claim?
Most boat insurance policies generally require you do the following things:
- Give immediate notice of a possible claim to your insurance company or licensed producer. If the loss is a theft, notify the police.
- Protect your property from further loss or damage. If you make temporary repairs, keep a record of what you do and save all receipts for all expenses you incur in undertaking repairs, including, for example, emergency repairs to maintain a boat's seaworthiness.
- Give your insurance producer, claims adjuster and/or insurance company a copy of a list of all damaged, destroyed or stolen property (being sure to keep a copy for yourself), including a picture of the damage..
- Show the damaged property to your insurance producer, claims adjuster and/or insurance company, if asked. Do not dispose of any damaged property until your producer, claims adjuster and/or company says you can.