Boat / Yacht Insurance Basics

Boat Insurance:

There are two basic sections of a typical boat and yacht policy: Physical Damage & Liability. The physical damage section covers accidental loss or damage to the boat, machinery, sails and other equipment on board required to operate the vessel.

The liability section referred to as Protection & Indemnity or Watercraft Liability covers losses to third parties to include bodily injury or loss of life, or damage to someone’s property caused by the ownership or operation of your boat. Liability also helps pay for legal defense costs if you are sued for a liability that may be covered in your boat or yacht insurance policy.

Physical Damage Losses:

Physical damage coverage for your boat generally pays for repairs if it is accidentally damaged or destroyed by a covered peril such as collision with docks, other boats, submerged objects, theft, vandalism, sinking, Acts of God etc. The best policies provide “All Risk” coverage meaning if the cause of loss is not excluded, then it is covered. Normal wear and tear is generally excluded under a boat or yacht policy.

Loss Settlement (Agreed Value & Actual Cash Value):

A boat or yacht policy can provide physical damage coverage on an Agreed Value or Actual Cash Value basis. An Agreed Value Policy means that the insured and insurance company have agreed on the value of the vessel and in the event of a total loss, the policy will pay the amount shown on the policy. Under this type of policy, damage resulting from a partial loss is generally paid on a replacement cost (new for old) basis, less the policy deductible. In other words, depreciation will not be applied to the covered loss. However, some equipment may be subject to depreciation such as boat covers, sails, trailers and some machinery.

Actual cash value policies provide less coverage than an agreed value policy. An ACV policy provides coverage up to the current market value of the vessel in the event of a total loss and takes into account depreciation and the condition of the vessel at the time of loss. Partial losses are settled by taking the total cost of the repair and subtracting a percentage for depreciation. The hull deductible is also applied.

While an agreed value policy is more expensive and provides better coverage, an actual cash value policy may be advantageous to the owner looking for lower insurance costs.

Terms & Coverages

Physical Damage:

Provides coverage for your boat if it is accidentally damaged or destroyed from an external cause such as collision with a fixed or movable object, fire, theft, vandalism, Acts of God etc. Coverage applies to the vessel, machinery, sails and other equipment normally required for the operation of the vessel.

Vessel Liability:

Provides for the insured if he/she is legally responsible for property damage, bodily injury or death of someone other than the insured person or a family member. Coverage also includes defense costs and removal of wreck (some Watercraft Liability Policies exclude wreck removal). Coverage may also include liability to a paid crew.

Personal Effects:

Personal property belonging to the boat owner and his/her family is covered and may include items such as clothing, sports and fishing equipment while onboard the vessel and being loaded and unloaded. There are exclusions that vary from company to company therefore the policy form should be reviewed. Most companies offer a standard limit subject to a deductible. Higher limits are available upon request.

Medical Payments:

The Medical Payments Section of the policy pays for reasonable medical expenses resulting from injuries to the boat owner, family members or guests while on, boarding or leaving the covered vessel.

Uninsured Boater Coverage:

The Uninsured Boater Section provides coverage for injuries from an accident caused by an uninsured owner or operator of another vessel or from a “hit and run” situation.

Federal Longshoremen’s & Harbor Workers Compensation:

Covers bodily injury to persons temporarily employed aboard an insured vessel and who fall within the jurisdiction of the Federal Longshoremen’s and Harbor Workers Compensation Act.

Commercial Towing and Assistance:

Reimbursement for reasonable costs due to a break down at sea and in need of commercial assistance up to the limit specified in the policy. This includes towing your boat to the nearest repair facility and delivery of fuel.

Trailer Coverage:

Coverage for loss or damage to the vessel’s trailer and subject to a deductible.