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Boat insurance basics
Do I need insurance for my boat?
Compiled by FirstBoat.com Staff writers 2002
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Similarities, differences abound
Although the policies are different, boat and yacht insurance policies share many similarities. As we've already said, it's important to know what your policy does and doesn't cover, so read the policy carefully.
Yachts and boats less than 15 years old are typically insured on an "agreed value" basis. That means the insurer will pay the full amount for which you're insured in case of a total loss. There's no depreciation deduction.
Vessels, like cars, lose value as they age. Insurance companies usually re-evaluate the market value of a boat every five years. That way, the coverage more accurately reflects your needs.
On the other hand, boats more than 15 years old are covered on an actual cash value basis. In that case, the insurance company would pay you what the boat is worth, minus depreciation, in case of a total loss. No matter the age of the vessel, insurance companies will only pay the actual cash value of some items -- such as sails, covers or outboard motors.
If you suffer a partial loss, the old, damaged item or items are usually replaced with new ones. Insurers sometimes refer to this as "new for old."
Both yacht and boat insurance can also include uninsured boat, towing and medical payments coverages. If you're beginning to think we've gotten boat insurance mixed up with auto insurance, we haven't. The two aren't that different.
Uninsured boat coverage serves the same purpose as uninsured motorist coverage does in car insurance: to cover you in case the "other guy" doesn't have insurance. Medical payments coverage pays for medical costs incurred by someone on your boat. Towing coverage pays for the cost of having a commercial outfit tow your vessel back to port if it breaks down.
Keeping the costs down
The cost of a policy depends on several factors, including the type of vessel (such powerboat, sailboat, performance or pleasure cruiser), its size, its age, where it'll be used and even the boating experience of the operator.
According to the Insurance Information Institute, insuring a 25-foot speedboat worth between $20,000 and $25,000 would cost between $500 and $900 for physical damage coverage and about $5,000 for liability coverage. Before your eyes bug out any further, keep in mind that speedboats will be on the high end of the scale. A similarly sized sailboat might cost 25 percent to 50 percent less to insure. Just as sports cars are more expensive to insure than sedans, fast powerboats will cost more to insure than sailboats.
There's plenty you can do to keep your insurance costs down. For one, you can (and should) take an approved boating safety course. These are offered around the country by the U.S. Coast Guard Auxiliary and the U.S. Power Squadrons, and can give you a premium discount of anywhere from 5 percent to 20 percent. In some states, such as Connecticut, you are required to take one of these courses to operate a boat.
Premium discounts are also usually available for newer boats, protective devices (like a depth finder, ship-to-shore radio or burglar alarm) and for getting your vessel inspected by the Coast Guard Auxiliary (these inspections are often free). Some companies even offer discounts for vessels powered by diesel engines.
As with any insurance policy, higher deductibles can lower your premiums. Deductibles for watercraft policies range from 1 percent to 10 percent of the coverage. So if you have $20,000 in coverage, a 1 percent deductible would be $200. Before you opt for a higher deductible, you should make sure you can afford to pay it.
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