Personal Boat Insurance -- The Hull Story

This is the story of Capt. Jack Hull. I use it to chronicle the path often taken by insurance agents in developing boat insurance coverages for clients. The boat in our story starts out as a small dingy in the backyard. It kind of looks like a canoe with an eggbeater, but it is Capt. Jack's first boat, and he needs insurance.

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

You are his agent. Your first thought might be to consider adding an endorsement to his homeowners' policy. What is the limited coverage for the size or type of boat? Does it still fit into the limit of sailboats under 26 feet, outboards with less than 25 horsepower, or inboards with an outdrive of less than 50 horsepower? What about liability limitations, towing or assistance coverage, uninsured boater, pollution, or trailer coverage? Is Capt. Jack's homeowners' insurance company set up to handle boat claims?

As the boats get bigger (as they always do), so, too, do coverage considerations. Capt. Jack quickly moves up from the dingy to a 14-foot boat. Then, desiring more safety, he trades up to a 20-foot Boston Whaler.

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

Dream Boat

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

Another big issue: Where is his boat covered? He is no longer able 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 yard or marina or docking his boat privately. What waters could he navigate? 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 one or two percent. He decides he is not interested in a specific peril deductible such as hurricane.

Capt. Jack also has to give consideration to his obligation as the boat owner to pay for any bodily injury, death to a third party, or property damage that could occur from the operation of his boat. Pollution coverage to provide for clean-up, spillage maintenance, potential damage to fish and marine life, natural beauty or drinking water also is important. And what about those usage questions about professional or for-hire to tow water skiers or official racing? All of these create a new set of underwriting considerations. What about uninsured boaters? Perhaps he needs a liability umbrella to extend beyond his basic coverage.

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

Life at the Top

Eventually, Capt. Jack arrives at the pinnacle of his boating life: He buys a new luxury yacht. Most companies require that the hull be over 100 feet to qualify for this classification. Does he need to revisit towing and assistance coverage and operation territories listed on the policy to possibly include international waters? Also, does he need to update the haul-out coverage in the event of a significant storm or hurricane to protect the vessel?

Capt. Jack now has a paid crew and captain to maintain and operate his luxury yacht. Injuries to the crew and captain are covered under federal protection of the Jones Act, not workers' compensation. However, injuries to casual laborers who may be repairing or maintaining his vessel while it is docked would be covered 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. Insurance was not a significant issue for him early in his boating life. However, he came to appreciate the peace-of-mind of proper insurance coverage and an agent who took the time to make sure he not only was covered, but also understood his coverage.

James “Skip” Boylan, LUTCF, CIC, RFC, is a Farm Bureau agent in Margate. He is the multi-line chair for the National Association of Insurance and Financial Advisors – Florida and the president of its local association, NAIFA – Sawgrass. He may be contacted at sportskip@aol.com.