Boat Insurance Terminology
Insurance companies, much like mariners, enjoy their terminology. Your comprehension of the terms they use could make the difference between a fulfilled claim and bankruptcy in the event of an accident or a sinking. It is therefore vital that you understand all the terms used in your boat insurance contract. Ask your insurance company to explain any unclear or vague wording. Your financial security may depend on it.
This is the broadest type of boat insurance policy. If you can get it, “All Risk” is the type of policy you want. Essentially it says that any damage your boat sustains is covered, outside of certain exceptions. Here’s the tricky part: you need to know exactly what those exceptions are. Make sure you read your policy so you don’t get stuck with an unexpected bill. “All Risk” policies are great, but only so long as you know what yours doesn’t cover.
This is one of the most common exceptions to All Risk policies, and it is dangerous to ignore. Let’s say your raw water intake hose springs a leak while you’re moored. Let’s just say. Now, most through-hull fittings (fish finders, depth, sounders, etc.) fail because of corrosion and usual wear and tear. They fail with some frequency, so insurance companies usually do not cover them. Here’s the kicker, though: If your policy excludes “consequential damage” as a result of “wear, tear, and corrosion” You will NOT get paid if your boat sinks as a result. If you have through-hull fittings on your boat, make sure that your policy covers you for “consequential damage”. If your policy doesn’t include it, try to add it on separately. You do not want to get stuck with the full bill.
You may also see this called Protection and Indemnity coverage (or P&I for short). Are you at-fault in an accident? This coverage protects you and will pay your attorney costs, as well as any settlement damages up to the specified limit. There are a few types of liability coverage, typically with separate limits to keep track of:
1. Property Damage Liability: Maybe your motor dies at the wrong moment and you accidentally plough into another boat. Maybe your throttle rebels, and instead of reversing, accelerates into the gas dock. I’m not saying that either of those things will happen to you. Just that they have happened to me. If so, your property damage liability insurance will kick in to pay for damages.
2. Bodily Injury Liability: This one’s pretty simple. If anyone outside you or your family is injured in an incident, this will help cover medical expenses, as well as legal fees and settlement costs. The parties can be passengers on another vessel, guests on your boat, or even people injured on a dock or ashore. We all know how insane medical bills can be. You don’t want to get stuck paying them out of pocket.
3. Fuel Spill Liability: Also called “pollution liability”, this is exactly what it sounds like. Particularly when boats sink, oil and fuel seep into the water. If it was your boat, you will be paying for clean-up. In addition, spills at the gas dock or fuel leaks can lead to hefty fines on top of clean-up. This coverage is sometimes included in your overall liability coverage. If possible, try to separate it from your boat’s overall liability insurance. The current federal maximum for an environmental cleanup fee is $850,000. You’d be surprised how quickly a spill becomes that expensive. You don’t want that money coming out of your standard liability fund, which you may need for other claims.
Hull Only Coverage
This protects your boat itself. If it sinks, and all your possessions aboard are ruined, you will receive compensation up to the cost of the boat. However, none of your possessions, electronics, or other gear fall under such insurance. As a result, you may well have thousands of dollars of uninsured property, depending on what you bring on your boat.
Anglers, take particular note. Any fishing gear you purchased after the boat, even if you then bolted it to the deck, will not fall under “hull only” coverage. At the very least you’ll want a specific policy add-on to cover fishing gear if you have expensive equipment that you don’t want to buy again.
Actual Cash Value
Boats, like cars, begin to depreciate in value as soon as they leave the sales lot. ACV adjusts your payout in the event of a loss to cover this depreciation. If your boat is ten years old, your insurer will pay you what they believe the boat is worth now. Note: they will NOT pay you what it would cost you to buy a new version of the same boat. Obviously your insurance company ultimately determines what your boat is “currently worth”, and many people disagree with what their company determines.
Such policies usually have cheaper premiums than “agreed value” policies (see below).
You decide with your insurer the amount your boat is worth beforehand. If it sinks, you will receive that amount. Insurance companies usually offer these policies for new boats, when the “agreed value” will cover the replacement value (new for old). Agreed value policies do not take things like depreciation into account. The agreed value pegs the value where you set it. Such policies tend to have higher premiums (because they will cost the insurance company more if the boat sinks). Insurance companies may not offer “agreed value” policies for older vessels. The value of older boats can be difficult to assess, and they are more likely to make claims.
(This term usually contrasts with Actual Cash Value, above).
In addition to the above terms, you’ll want to check your policy’s fine print for information on all of these circumstances in your policy. Basically, you need to know when your policy is in effect, where it’s in effect, and what you need to do in certain circumstances to keep it in effect.
What are the Dates of Coverage?
This is usually a simple answer. Even so, it is something you should check before you even think about moving your boat.
Launching your Boat
- If you are doing this yourself, it is vital that you are covered during your drive from your storage location to the launch ramp. Many of us have years of experience driving trailers, but it’s often only a few times a year. If you’re anything like us, it’s easy to be a bit rusty, tired and in a rush.
- Many auto policies will cover your boat if it’s on the trailer and attached to your car. But many do not. If you don’t check on this ahead of time you could be in for a real surprise.
- The same is true of launching boats. One of the most common reasons that boats sink is that owners forget to replace critical plugs before launching. If you are not covered during launch you may be out of luck. Flooded boats are expensive and a real mood killer.
On the Hard
When the boat is not in the water is it covered? This may sound like a silly question, but some policies only cover your boat when it is in the water. For many northern boaters, that may only be for a few months. What about the rest of the year? From theft, vandalism, and weather, boats can endure just as much punishment out of the water as in it.
If you’re not covered when she’s out of the water, you could be in for a surprise. Just because you are not using her does not mean she cannot get damaged. As an added incentive, this coverage is often quite affordable. Just make sure you read the note below if you are in hurricane prone areas.
While this is not relevant for everyone, it is crucial if you live in a hurricane zone. With weather patterns changing and hurricanes extending their season and range, policies are changing as well. The three questions to focus on are:
- Geographically, where are you covered if you are in the water?
- If you are out of the water what storage conditions do you need to meet? Is it enough to have your boat tied down, or does it need to be inside?
- Finally, make sure you have clarified the dates that hurricane coverage is valid, as it strongly relates to your geographical location.
We found this topic quite relevant in 2012, when we had a boat in Norfolk Virginia as Hurricane Sandy was rolling in. Fortunately, we had checked and confirmed that the boat was covered should the worst happen. We were not forced to even consider remaining with the boat as the storm was coming in.
Many boat policies include some level of life and injury coverage. For those who already have great policies, this could be a chance to lower your premium by removing those components from your boat insurance.
We highly recommend that you keep personal injury liability coverage, however. Should something happen with guests aboard you want to be protected.
Where is my boat insurance policy valid?
For people who are based on inland lakes this may sound silly. But for boaters on the Ocean or on Northern lakes, it is a real question. While using your boat in other states for short periods of time is generally covered, boating in Canada, the Bahamas and Mexico is likely not. For more information on international boating insurance, click here.
Do I need to take my boat out of the water regularly?
Although this is not all that relevant for northern folks (for whom the answer is unequivocally “yes’), many southern boaters leave their boat in the water year-round. While some policies accommodate that, others do not.
The reason is quite simple. Over time, water leaks through the gelcoat and into the fiberglass, weakening the hull. While not all boats are fiberglass, most are, so insurance companies often like to see the boat taken out of the water from time to time. If this might impact you, it’s best to check.
It’s easy to zone out while reading your insurance quote. We want to help you understand what your policy protects and what it does not. There are few feelings worse than realizing you’ve misread the policy and aren’t covered for an accident. If you think we should include any other terms that you don’t see on this list, please let us know, and we will be happy to add them.