Many people dream of a summer spent sailing on the open seas, waking up at dawn to teach their children how to fish, or simply relaxing on a pontoon boat as they wave to their fellow boat lovers as they pass by. For some people, this is not just a dream, but also a reality. However, that reality can suddenly turn disastrous by a tragic crash. So, make sure you have the right boat and yacht insurance.
According to the National Marine Manufacturers Association, 75 million people participated in recreational boating activities in 2010. That’s almost a quarter of the entire population of the United States! Additionally, the number of registered boats tops over 12 million. If you live in the land of 10,000 lakes (aka Minnesota), almost 1 million of those boats are in your state! No doubt, you may be affected by boating in some manner during your lifetime. So, it’s time to start thinking about insurance.
This article will provide you with a guide to everything you may need to know about protecting your boat or yacht. Insurance is important! Accidents can be unexpected and possibly tragic.
Owners of boats and yachts have not been immune to such accidents, nor have they avoided the pitfalls of the 2008 market crash. Boat ownership is a luxury, and according to IBISWorld, spending on the boats themselves, as well as boat insurance has significantly declined recently. People would rather save money and reduce the type of coverage they have, than protect themselves. However, boat owners are putting themselves at a heavy financial risk by making such a decision. In this same time period, the number of claims has risen, with such environmental disasters as Hurricane Sandy, which put a significant dent (both literally and figuratively) into the marine equipment lining the eastern coast of the United States.
The U.S. Coast Guard is charged with collecting data on recreational boating accidents in the U.S. In 2012, the agency tabulated 4515 accidents. These resulted in 651 deaths, 3000 injuries, and 38 million dollars in property damage. The top five factors in these accidents were:
- Driver distraction
- Driver inexperience
- No person serving as a lookout for danger
- Machinery failure
- Excessive speed
According to Travelers
- 70% of boat accidents in 2006 occurred because the driver had not taken the proper safety courses.
- In 20% of boating fatalities, alcohol use was a contributing factor.
- Of the boating fatalities recorded in 2006, 423 people could have been saved if they had been wearing life jackets.
The most common types of watercrafts involved in these accidents were:
The five most common types of motorcraft accidents were:
Though the number of accidents had decreased between 2011 and 2012 by 1.6 percent, this number should not reassure potential boat-owners of the start of a trend towards better safety and fewer hazards while on the water. Of course, many accidents go unreported, and the yearly number of accidents is probably much higher. Boat owners should be aware of such water hazards and prepare themselves for any potential accidents that may be in their future.
According to Terry Johnson of the University of Alaska, just because there may be fewer boats in the water than there are cars on the road, doesn’t mean that accidents can’t happen. A boat can simply sink into the water, spill fuel, or smash into another boat because of high wakes, all while sitting empty at the dock. If this happens, you a legally responsible for the damaged caused to your boat, the boats around yours, or the lake that suffered an influx of dumped fuel. Insurance can help protect you against any and all accidents that occur, whether you’re riding in your boat at the time of the accident or not.
Types of Insurance
Many boat owners may assume that their vessel is covered under their home insurance, but in many cases, it’s not. Jay MacDonald from bankrate.com wrote an article on the key factors one should consider when purchasing boat insurance. In his interviews with insurance companies, he noted that boats need to be covered through a separate policy. His article reports:
“Many homeowners policies will have a minimal amount of coverage for really small boats with either no engine or a very small engine, like a sailboat,” says Mitch Jawitz, vice president of marketing and distribution at The Hanover Insurance Group. “But if you’re buying a $10,000 or $20,000 boat, your homeowners policy is not going to cover you for what you need.
There are two classes of insurance typically offered for recreational vessels: boat and yacht policies.
Boat insurance policies usually include the following:
- Protection and indemnity limit amounts of less than $500,000
- Payment of actual cash value toward the vessel
- Trailer and personal items
- Bodily injury to passengers
Often, items not covered under boat policies are parts of the boat that can have mechanical failures, such as the engine. However, this depends upon if there was a fire or theft involved.
Yacht insurance is a different game entirely. Usually, an insurer will provide you with a range of options that you can pick and choose between.
Yacht insurance policies usually include the following:
- The yacht’s value in the instance of total loss
- Engine failure by accident or driver error
- Removal, towing, salvage, and pollution costs
- Higher liability limits
- Occasional commercial use
- Optional accessories like tenders and dinghies
There are also other types of insurance that you may want to consider: port risk coverage and builder’s risk insurance.
Port risk: If you plan to leave your boat or yacht docked for a long period of time (more than 30 days), port risk insurance is a lot cheaper. It covers physical damage, protection, and indemnity.
Builder’s risk: If you plan to have your boat rebuilt or refurbished in any way, this insurance is important to have. This will cover the materials and work invested into the project.
Think of your boat insurance like your car insurance. It will tend to cover such incidents as crashes, injuries, and damage to the boat or other property. Like a car, you can also purchase comprehensive insurance that will cover your boat in cases of fire, floods, towing, personal property on the boat, and instances where you have a collision with an uninsured boater.
- Some insurance policies may allow you to suspend your coverage during the winter months. So, if there’s you’re experiencing a warm Thanksgiving day and feel like taking the boat out for a spin, you may not have insurance. As quoted in Jay MacDonald’s article, “Sometimes boaters aren’t aware of that and (on) some nice day in November, they take the boat out for the day and have an unfortunate incident, only to find out that their boat was to be out of the water from Oct. 15 to April 1,” says Cyr.
- There may also be geographical limitations to where you can take your boat or yacht. For instance, you may want to avoid navigating the high seas near known pirating areas off the coast of Somalia. You probably won’t be covered. Jay MacDonald’s article reiterates this point: “Most policies contain a navigational warranty,” says Cyr. “It’s usually the inland waters of the U.S. and Canada or the coastal waters of the U.S. and Canada for smaller boats up to 26 feet. For larger craft, we have 22 territories that are defined by geographical points. For instance, one of them goes from Eastport, Maine, to Cape Hatteras, N.C.; another goes from Eastport, Maine, all the way around Florida to the panhandle.” However, sometimes you are allowed a one-time exception. You would need to verify this with your individual insurance agent.
As mentioned previously, many boat owners have dropped their insurance or tried to purchase the cheapest coverage available to save money and retain ownership of their vessel in this rocky economic climate. While it is not recommended that you follow either of these two practices, there are several factors that you should keep in mind when considering the type of boat insurance coverage to purchase. Often, smart boat insurance choices can result in less expensive coverage.
Be specific! Talk with your insurance agent about the type of coverage you need. You don’t want to be paying for a speed boat policy when all you have is a small fishing boat. Often, the insurance can be very specific based on your needs and vessel type.
Usually, boat insurance can be bundled with other policies, such as home and auto. Since it usually provides less coverage than car insurance might, it’s usually cheaper. Be aware that if your boat is longer than 26 feet or cost you more than $30,000 to purchase, you might not be able to get coverage. This is because of overhead and administrative costs to the individual insurance agent.
According to an interview conducted by Jay MacDonald, “There’s often a cross-sell discount,” says Chantal Cyr, vice president of product management for Travelers. “At Travelers, if your boat is less than 30 feet and you have one or more policies, you can save 10 percent for one policy and 15 percent for the second.
In addition, insurance companies may also provide you with discounts for the following: carrying additional, non-required safety equipment; completing a boating safety class; and having zero accidents while driving a boat and car.
What To Do in Case of a Boating Accident
Try following this multi-step process in the event of an accident:
- File an accident report with the U.S. Coast Guard within ten days. By federal law, you a required to do so if the incident involved a boat passenger’s death, injury, medical treatment, or damage to the boat of more than $500. The link below will direct you to the proper form: http://uscgboating.org/recreational-boaters/accident-reporting.php
- Provide your insurance agent with as many details as you can about the accident. This may include the time and day of the incident, people involved in the accident and recovery effort, weather conditions, witnesses, events leading up to the accident, and your expenses for parts needing replacement or any other services. Be sure to keep your receipts!
- Schedule a time for the insurance adjuster or marine surveyor to inspect the boat BEFORE you have the repairs done.
Speak With Your Insurance Agent
Many insurance companies offer a variety of coverage options for your water vessel. Speak with your insurance agent today about the right insurance for you.
They say the two best days of owning a boat are the day you purchase your boat and the day you sell it. Having the right information and right insurance can mean that the time spent in between these two days can be enjoyable as well.
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