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.