Frequently Asked Boat Insurance Questions
Do I have to insure my watercraft?
By law, you do not have to carry insurance to operate your boat. However, most marinas will require you to carry $1,000,000 or $2,000,000 in liability insurance if you are going to moor or store your boat on their property. If you are financing the purchase of your boat, the bank or financing company will require you to carry fire & theft insurance.
Can I insure my watercraft under my home insurance policy?
Most home insurance policies will allow you to insure boats up to a certain length or horse power. This is generally limited to small aluminium boats with outboard motors. You may have no choice but to insure your boat under a stand-alone boat insurance policy.
Home insurance policies are not intended to cover marine risks and have limited coverage for boats where as a stand-alone boat insurance policy will offer all-risk coverage. The basis of loss settlement on a stand-alone boat insurance policy is Agreed Value which is the amount shown on the policy declaration page. On a home insurance policy, the basis of loss settlement is Actual Cash Value which is replacement cost less depreciation. You may save some money by adding your small boat to your home insurance policy but it could cost you thousands of dollars when a loss occurs, assuming you have coverage in the first place.
Lastly, if you insure your boat under your home insurance policy, a claim on your boat counts as a claim against your home insurance policy. Once you have a couple of claims, your insurance company may cancel your home insurance policy. If that happens, you will have to purchase a high risk policy at triple the premium you were paying before.
What is the difference between Agreed Value and Actual Cash Value?
The difference between Agreed Value and Actual Cash Value is in how an insurance company calculates the amount they will pay out under a total loss. An Agreed Value policy will pay the amount (limit) that is shown on policy declaration. An Actual Cash Value policy will pay the replacement cost of the boat less depreciation. The insurance company will take into account the market value of similar boats as well as the condition of the boat prior to the loss. The payout under an Actual Cash Value policy can be significantly less than under an Agreed Value policy.
Do I have coverage when towing my watercraft?
The physical damage to your boat and trailer is covered under your boat insurance policy. The liability coverage is covered under your auto insurance policy. For example, if someone rear-ended you and damaged the boat and/or trailer, this would be covered under your boat insurance policy. If the trailer disconnected from your vehicle and damaged a third party vehicle, your auto insurance policy would respond.
What is a survey and do I need one?
A survey is an appraisal on the boat performed by a qualified marine surveyor. It is an in depth document containing information on the condition of the boat and an estimate as to the current market value. A survey usually ends with the surveyor’s recommendations regarding repairs or safety issues. A survey can cost upwards of $250 or higher. It should not be confused with a marina letter that is typically one page and costs very little.
Surveys are generally required on vessels that are 15 years of age or older. Insurance companies may accept surveys that have been done within the last 5 years. The insurance company will want to review the survey prior to providing a firm quote or an insurance policy. Any serious recommendations will have to be completed prior to insuring the boat. Less serious recommendations can be completed after the policy is issued.
If you are looking at purchasing an old boat, request a survey from the seller. If there is a recent survey, have the seller go through all of the recommendations to see which ones have been taken care of. If the seller has not completed the recommendations, then you will have to complete them. If you purchase the boat without a survey, you run the risk of purchasing an uninsurable boat with huge repair bills.