By Branden Helton, American Modern Insurance Group

Yachts make up just a small percentage of the overall boat market, but carry larger-than-average premiums that make them a lucrative market for agents and brokers who understand the market and know how to write this business. Higher premiums also give you an opportunity to focus on customer service and position yourself as a trusted expert in this exclusive niche.

Generally defined as recreational sailing and powerboats ranging in length from 33 feet to hundreds of feet, yachts may come with multimillion-dollar price tags for “mega yachts” or “super yachts.” Most, however, run from several hundred thousand dollars to about a $1 million and are found in large bodies of water, from the West Coast to the Gulf, Great Lakes and hurricane-prone East.

Sales trends generally follow the overall boat market, which still lags pre-recession numbers. In 2012, boat sales recorded a 10 percent increase, the first significant jump since the recession, according to the National Marine Manufacturers Association (NMMA). In 2013, the NMMA forecasts another 5 to 10 percent increase. There may be an additional bump in sales on the East Coast as owners seek to replace some of the estimated 65,000 boats destroyed by Superstorm Sandy.

Read related: “4 Sandy Lessons.”

Insurance coverage for yachts (some cabin cruisers and houseboats fall under similar policies) is standard in some ways: they are best protected by an agreed value policy with physical damage protection for the hull, comprehensive coverage for other kinds of damage or loss, and liability coverage. Yet there are significant differences in yacht policies that need to be addressed to fully protect your customer and their investment.

Here are four things to consider when placing yacht coverage:

1. Consequential Damage

The first coverage to consider is consequential damage. This applies when a yacht is disabled by engine failure and suffers resulting hull damage. Although hull damage is covered in most policies as a result of a storm or other event, it may not be when it is a “consequence” of mechanical failure. That makes it important to ask for consequential damage coverage.

With this coverage, the initial cause of the damage, including any type of mechanical failure, does not void the coverage. This is a must for your clients with older yachts like much of the 15- to 20-year-old inventory on the West Coast right now. Even on the East Coast, where inventory turns over faster due to windstorms, pre-owned sales still dominate the market.

2. Parts Depreciation

For many of these older boats, yacht owners experiencing a loss often deal with depreciation in the value of parts. That is, the parts lose value as the boat ages, and most insurers will cover only the depreciated value of the part and not the full cost of replacing it. Different parts depreciate in value at different rates, and insurers also vary in how they factor depreciation for a part.

For customers, this means costs can fluctuate greatly in the event of a loss. One solution is an endorsement that waives depreciation for a specific period of time, up to about 10 years old. This means your customers will have lower out-of-pocket expenses at the time of a loss.

3. Navigation Zone Restrictions

Many yacht insurance policies are written based on navigation zones. These geographic areas may be as narrow as the Florida Keys, with premiums partially driven by the area's rating. That means a boater who insures his yacht in California's Bay Area may not be covered for damage that occurs in Mexico's Pacific Coast.

However, there are policies available that define navigation zones much more broadly. The policy would cover an area such as the entire coastal U.S., or all waterways in the U.S. and Canada. Some insurers offer optional navigation endorsements to destinations such as the Bahamas.

4. Adequate Limits

Yachts are a decidedly big-ticket item and often loaded with expensive equipment. That makes it particularly important to look for adequate limits and specialty coverages when writing yacht coverage:

Up to $10,000 in coverage for personal effects and fishing gear
Up to $2,500 to reimburse emergency assistance and towing, and up to $10,000 for search and rescue
Up to $1,000 per day ($10,000 per term maximum), plus lodging and transportation.

Additionally, recommend coverage for accidents when the other boat has little or no insurance, and also liability protection that extends to use or rental of another boat. Coverage should meet the requirements of the Longshore and Harbor Workers' Compensation Act, as well.

Read related: “Know the Ropes on Boat Insurance.”

A boat owner's experience always matters for their insurance policy, but this is especially true when you're writing a policy for someone with a million-dollar yacht. Know your client, their boat and where they travel.

Also focus on writing with a top-rated carrier. With a luxury item such as a yacht, claims can be large, so the carrier's balance sheet is important.

Whether you're taking advantage of new yacht sales or the inventory of older vessels filling West Coast waters, by choosing highly rated carriers, safe customers and policies with the coverage they need, you'll be well positioned to prosper in this lucrative niche.

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Got Yacht? Watch for These 4 Coverage Issues

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