As consumers deal with the fallout from the recession, some are cutting back on coverage when insuring non-essential luxury items such as boats and other recreational watercraft–a short-sighted step that could come back to haunt them, carriers warn.
Indeed, cost-cutting measures such as dropping or modifying coverage could leave policyholders high and dry with inadequate protection, according to experts at Travelers, which outlined five common mistakes consumers are making in this economy.
Travelers said these measures could leave consumers with coverage gaps and a "false sense of security."
The most common misstep consumers are making when trying to save money is dropping insurance once their boat is paid off. But Chantal Cyr, vice president of boat and yacht coverage for Travelers, told National Underwriter a policy covers a lot more than just the vessel structure.
Most boat policies, she noted, are packages that cover the vessel, towing and personal property as well as liability and medical costs.
Additionally, even though a boat is paid off, Ms. Cyr said many boaters do not consider how expensive it can be to repair a vessel. Boats can also be damaged by factors outside of the boater's control, she noted, such as fire or striking a submerged object.
"A lot of boaters think those things never happen to them," Ms. Cyr said.
She added that some clients have been looking to cover only liability on their boats, but agents have done a good job coaching their customers to keep physical damage.
In a statement, Ms. Cyr said "insurance is there to protect a family's financial position, and changing the policy to find a way to save money in the short term should only be done with careful consideration."
Ms. Cyr told NU consumers can speak with their independent agent to get advice on how to save money in a smart way.
Among some of these "smarter" possibilities, Ms. Cyr mentioned changing the deductible within reason, and taking advantage of safety device credits and multiple policy discounts.
She also said some boaters are opting not to use their boats this year, and insurers offer coverage to protect against risks like fire and theft while providing discounts if the boat will not be navigating in the water.
The degree to which consumers are eliminating or limiting coverage varies depending on region.
For example, Dave Sidle, president of Sidle Insurance in Watkins Glen, N.Y., and director of the Professional Insurance Agents of New York, said he insures small craft that travel on Seneca Lake in New York–which is 40 miles long and two miles wide. He said he has not noticed much of a change in his area but has heard fellow agents in and around New York City who have seen marketplace shifts.
He said the situation in his region may change depending on what happens with the economy or with reinsurance rates. But as of now, he said all he has seen is a drop in opportunities to cover new boats, as disposable income is down.
Ms. Cyr said boat sales are falling in other areas as well, but noted there are millions of existing boats, and opportunities still exist to grow market share.
Speaking to the state of the boat insurance market in general, Ms. Cyr said it is not much different than it was a year ago.
David Price, executive vice president and chief underwriting officer of Burns & Wilcox in Farmington Hills, Mich., said he has not seen a change in the number of carriers writing these risks, either. He said there have been some modest amendments to rates, and these can be seen in the form of both increases and decreases depending on where boats are navigating.
He said there is still heavy competition for risks on the Great Lakes, for example, but less competition in windstorm-prone areas such as the Gulf and Florida Coasts.
Mr. Price said generally the insurance market for boats under 30 feet operating inland remains very competitive. These risks can be written as extensions on homeowners policies, or by specialty carriers or direct carriers. Terms for these policies, Mr. Price said, can change more quickly and easily.
Conversely, he said the insurance market for larger boats that require a full marine policy is not as competitive. Capacity for blue-water yachts is "scarce," according to Mr. Price.
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