This is the story of Capt. Jack Hull. I use it to chronicle thepath often taken by insurance agents in developing boat insurancecoverages for clients. The boat in our story starts out as a smalldingy in the backyard. It kind of looks like a canoe with aneggbeater, but it is Capt. Jack's first boat, and he needsinsurance.

As with most products, with insurance you get what you pay for,and one size does not fit all. Fortunately, Capt. Jack is notshopping just for the lowest price. He welcomes his agent's counselto ensure that he is covered properly.

You are his agent. Your first thought might be to consideradding an endorsement to his homeowners' policy. What is thelimited coverage for the size or type of boat? Does it still fitinto the limit of sailboats under 26 feet, outboards with less than25 horsepower, or inboards with an outdrive of less than 50horsepower? What about liability limitations, towing or assistancecoverage, uninsured boater, pollution, or trailer coverage? IsCapt. Jack's homeowners' insurance company set up to handle boatclaims?

As the boats get bigger (as they always do), so, too, docoverage considerations. Capt. Jack quickly moves up from the dingyto a 14-foot boat. Then, desiring more safety, he trades up to a20-foot Boston Whaler.

With each purchase and upgrade, more coverage questions comeinto play. There are many ways to characterize boats. However, inthis article we will use the characteristics of the hull as theprimary criteria. What material was used in construction of thehull? Is it wood, Kevlar, steel, aluminum, or fiberglass? Is this astock production model, customized, or a conversion? What powersthe boat? Is it an inboard, outboard, inboard/outboard, or sail?How many motors/engines and what horsepower does it have? There isgenerally a maximum horsepower recommended on the hull plate. Doeshis boat conform? Is this an open boat, or is there a cabin? Isthere a kitchen and, if so, what special safety equipment isonboard? Does the boat have a built-in CO-2 system to protect theengine and tanks?

Dream Boat

All of these questions and answers are important, particularlyif Capt. Jack plans on using his boat for charter, which he doeswhen he purchases the boat of his dreams — a 34-foot cabin cruiser.Does this move him into a yacht class? (Some companies classify aboat over 27 feet as a yacht.) Does his boat now have to beunderwritten commercially? Does he want a policy that is hulldamage only or hull and machinery? Or should he go with a propertydamage form? Capt. Jack wants some type of replacement costcoverage, but that likely means an endorsement. Is actual cashvalue, often used for smaller boats, a good alternative?

Another big issue: Where is his boat covered? He is no longerable to store it in his back yard and trailer it to a boat ramp.Now he has to factor in the pros and cons of using a storage yardor marina or docking his boat privately. What waters could henavigate? These territories have to be spelled out in his policy.In addition, he no longer wants the usual deductibles of $250 to$1,000. Instead, he wants a percentage of hull value — usually oneor two percent. He decides he is not interested in a specific perildeductible such as hurricane.

Capt. Jack also has to give consideration to his obligation asthe boat owner to pay for any bodily injury, death to a thirdparty, or property damage that could occur from the operation ofhis boat. Pollution coverage to provide for clean-up, spillagemaintenance, potential damage to fish and marine life, naturalbeauty or drinking water also is important. And what about thoseusage questions about professional or for-hire to tow water skiersor official racing? All of these create a new set of underwritingconsiderations. What about uninsured boaters? Perhaps he needs aliability umbrella to extend beyond his basic coverage.

There are also optional coverages that could be important, suchas medical payments that may provide coverage for persons boarding,aboard or leaving his boat. Also, does he need personal propertycoverage for fishing gear, radios, a LORAN, even the all-importantcoolers? (Speaking of coolers, what about liquor liability?) Willthe items be covered on a blanket basis or stated amount? If thereis emergency towing, what triggers a claim?

Life at the Top

Eventually, Capt. Jack arrives at the pinnacle of his boatinglife: He buys a new luxury yacht. Most companies require that thehull be over 100 feet to qualify for this classification. Does heneed to revisit towing and assistance coverage and operationterritories listed on the policy to possibly include internationalwaters? Also, does he need to update the haul-out coverage in theevent of a significant storm or hurricane to protect thevessel?

Capt. Jack now has a paid crew and captain to maintain andoperate his luxury yacht. Injuries to the crew and captain arecovered under federal protection of the Jones Act, not workers'compensation. However, injuries to casual laborers who may berepairing or maintaining his vessel while it is docked would becovered by the Longshoremen and Harbor Workers' Compensation Act(and you thought this stuff was easy).

Capt. Jack has lived a rich and full life on the sea. Insurancewas not a significant issue for him early in his boating life.However, he came to appreciate the peace-of-mind of properinsurance coverage and an agent who took the time to make sure henot only was covered, but also understood his coverage.

James “Skip” Boylan, LUTCF, CIC, RFC, is a Farm Bureau agent inMargate. He is the multi-line chair for the National Association ofInsurance and Financial Advisors – Florida and the president of itslocal association, NAIFA – Sawgrass. He may be contacted [email protected].