With summertime officially here, potential and existing policyholders may begin asking for advice on what types of boat insurance coverages they should have or need. As their agent, do you have a good working knowledge of the products and the market? The answer depends on many factors, including the type of customer as well as the type of boat they'll be using.
Below and on the following pages are photos of common watercraft to help you match coverages to the needs of many different kinds of boat owners: runabouts/pontoon/ski boats; bass/walleye boats; sailboats; high-performance craft; and yachts and houseboats.
Runabouts, Pontoons, and Ski Boats
In theory, virtually any boat can pull a skier, and if your insured plans to do so, they should consider a water sports endorsement with higher liability limits. Most boat owners should also consider coverage for emergency assistance and towing as well as additional protection for watercraft that might be uninsured, underinsured, or not owned by the user. Collisions between two boats—or finding your boat damaged while docked—are a lot more common than you would think.
Bass/Walleye Boats
Designed for avid anglers, fishing boats usually carry plenty of expensive equipment such as fish finders, trolling motors, GPS systems, and more. Insureds should consider getting sufficient coverage for these items, as well as higher personal effects limits for their fishing rods, tackle, and other accessories. Those who occasionally fish competitively or act as fishing guides should consider additional coverages for these activities, as well.
Sailboats
These craft usually will have auxiliary outboard engine power for use when winds are calm or while docking and undocking. These engines attract thieves like bees to honey, so sailors need to discourage stealing with locks on the engines as well as locks on their trailers while not in use. But because these measures don't always work, appropriate coverage for these special engines is crucial.
High-Performance Craft
This type of boat is powered by specialized engines and drive systems for maximum performance. Determining an accurate value of these boats for insurance purposes requires accurate information on the engines, drives, and accessories, often requiring an inspection before a policy is written.
Yachts and Houseboats
Yachts and house boats (27 feet and larger) are often loaded with additional high-value electronics, including navigation, radar, satellite TV, high-end stereos, and hot tubs. These items need to be considered when valuing the vessel.
Higher limits for personal effects may also be essential, as these larger vessels usually carry more gear. Yachtsmen should consider higher liability limits and may need occasional professional crew coverage. Yachts with a full-time captain and crew may need commercial marine coverage.
Boats over 10 years old and larger than 27 feet may require a recent marine survey as part of the application process.
Out of the Water
Most boats are used on a seasonal basis and spend extended amounts of time on dry land. Some boaters make the mistake of dropping coverage during the off season when in fact their boats are still vulnerable to weather, fire, and other perils. Some insurance companies require "lay up" periods, specific set dates when the boat is out of the water and not in use. It's also easy to forget the critical need to have adequate coverage on boat trailers, tenders to a larger vessel, and even the boat lift.
On the House?
The best way to insure a boat is by having a stand-alone boat policy—not an endorsement to a homeowner's policy. A homeowner's policy will usually limit the size and horsepower of the boat along with lower available hull limits and have little or no coverage for personal effects on board.
If your customer chooses to add a boat to his existing homeowner's coverage, make sure there is sufficient liability coverage if the boat is moored in a marina or if the owner participates in organized fishing tournaments. In virtually all cases, however, boaters are better served with a separate boat policy from a specialty insurer.
In addition to the type of boat, there are several other factors that need to be considered before writing a boat policy. For example, who is going to be driving the craft? Experienced boat operators and those who are claim-free may qualify for discounts. On the other hand, the insurance company will want to know who will be operating the boat, as well as a driving and boating history on the operators. For instance, the boat might be owned by two brothers: one with a good driving record and one with a record that is not so good.
Boats depreciate as fast as cars do, if not faster. For newer boats (three years or newer), your customer may opt for replacement cost coverage. As an example, if the boat is worth $20,000, the insurer will pay your customer that amount if the boat suffers a covered, total loss. For slightly older boats (up to 10 years), agreed value coverage may be a good choice. This simply means your customer and insurer agree on the value of the boat, and the insurer will pay that amount in the event of a covered, total loss.
A vessel that is more than 10 years old is typically valued at actual cash value, which is the market value of the boat at the time of loss—not to exceed the insured value listed on the declaration page. There is an alternative your customers need to know about: extended agreed value coverage. The owner of a boat that is more than 10 years old may be able to get an agreed value endorsement from some insurers.
Another coverage that is often overlooked is the extended parts replacement coverage. This coverage typically waives depreciation charges on repairs on vessels that are less than 10 years old. This coverage will help minimize your client's out of pocket expenses if a claim is filed.
Also, consider boat trailer coverage. Trailers are common targets for thieves, are almost impossible to recover, and are very often underinsured. Custom-built trailers with tandem or triple axles, custom wheels, and custom paint can easily cost as much as $5,000-$10,000. On many policies, trailers are listed separately, with a separate coverage amount. If this amount isn't enough to replace the trailer, the boat owner isn't adequately covered.
Finally, there is the matter of navigation, or where the boat is going to be used. If the boater plans to be in coastal waters, there will be limits on how far away from the coast the boat can travel. If they are planning to jaunt over to the Bahamas, make sure the policy allows for the extended navigation into those waters.
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