If a boat has value and the loss of it or damage to it would cause you financial harm, you should insure it. If a boat could conceivably cause injury to someone else or damage the property of someone else, you should insure it. If a loan exists with the boat as collateral and if you want to dock the boat at a dock owned by someone other than you, you need boat insurance.
Boats as Watercraft
Insurance policies vary and insurance regulations vary from U.S. state to U.S. state. In general, insurance companies categorize boats in terms of their size. Boats typically have a length overall, also called LOA, of 16 feet to less than 26 feet. A yacht is usually classified as having an LOA of 26 feet and longer. Personal watercraft, also known as PWCs, include vessels such as wave runners and jet skis. Each type of watercraft is insured with coverage appropriate to the vessel.
The Limits of Homeowner’s Insurance
Your homeowners' insurance may include some coverage for watercraft. By reading the policy, and especially by scrutinizing its limits and exclusions, you should be able to determine if the policy provides coverage and what its limits are. A homeowner’s policy may, for example, pay an amount up to $1,000 if your boat sustains damage by a covered peril while it is located on your residential property. Coverage at home may not be useful if the boat is more vulnerable to damage on the water. Similarly, the liability aspect of your homeowner’s insurance may be very limited when you use the boat, and the boat is likely to be a greater risk to others when it is used on the water.
Types of Coverage for Boats
Liability insurance helps protect you if your boat causes damage or injury to people or their property. Many marinas require that boats docked on their property are insured. They do not want the entire risk associated with your boat if a visitor is injured on your boat or between your boat and a dock. Similarly, if your boat breaks loose and damages someone else’s boat, the responsibility is yours.
Physical damage insurance is another aspect of boat insurance. The insurance is usually designed to cover the cost of repairing the boat in the event of damage, depending on how the boat is valued. In many instances, unless you request a different valuation method and are willing to pay a higher premium, the insurance pays within the policy limits based on the boat’s depreciation and after a deductible is paid.
Risks to Boats
Boats are exposed to many of the same risks that can befall cars, with an additional risk. Boats can collide with other boats and with other objects. Boats can be stolen and vandalized. Boats can and do catch fire. Windstorms and lightning can damage or destroy boats. Boats can sink. When a boat sinks, it exposes the owner to two potential types of loss. The boat is usually damaged and can even be a total loss. The boat, a motorized vessel, can leak fuel and oil into the water. The subsequent pollution can create a liability issue for the boat owner.
- yacht image by Philippe Minisini from Fotolia.com