Is Boat Insurance Really Necessary If You Are a Recreational Boat User?
If you’re a recreational boat owner, you may be wondering whether it’s really necessary to spend hundreds of dollars on boat insurance.
In this article, we cover all the details you need to know about boat insurance, including what boat insurance covers, and what you should consider when taking out coverage.
What Is Boat Insurance?
Boat insurance coverage is designed to protect you from the costs related to any injuries or damage that you may cause to others or to property while you are boating.
Depending on the type of boat insurance you take out, this can also cover your boat trailer if it gets stolen or damaged.
Although boat insurance is only mandatory in Utah and Arkansas, it’s highly recommended in other states as well if you own a boat.
Some examples of recreational boats include:
- Motorboats.
- Fishing boats.
- Sailboats.
- Jet Skis.
- WaveRunners.
Key Point: Some Quick Historical Facts about Marine Insurance Marine insurance is the earliest known type of insurance. 5,000 years ago, Chinese sailors would guard against shipping losses due to unpredictable weather and theft by spreading cargo across multiple ships. The first formal marine insurance policy was created around 1350, and the term ‘underwrite’ dates back to 1430. |
How Does Boat Insurance Work?
Boat insurance coverage works in a similar way to car insurance.
If you damage your boat in any way, cause injuries to another person, or damage another person’s property as a result of your boating, you would file a claim with your insurance company, asking them to pay out for any damages, injuries, or losses.
If the incident is covered, your insurance company will pay for the damages, losses, or injuries up to your coverage limits.
Key Point: Homeowners Insurance Is Not Enough It’s often believed that if you have home insurance, this adequately covers your recreational boat. However, this is not true. Home insurance will only cover you when the boat is parked in your yard, but not while you are transporting the boat on a trailer or using the boat on the water. You will need boat insurance as a separate coverage in order to fully protect your asset whether you are mooring, parking, moving, or sailing your boat. |
What Does Boat Insurance Cover?
Boat insurance policies come with a range of different options. The options available to you depend on your boat and the extent of the cover you are looking for.
Typically, you can expect the following basic coverages:
Bodily injury liability coverage
If you are involved in an accident while using or operating your boat and someone gets injured, bodily liability coverage will pay for their medical bills.
Property damage liability coverage
If you cause an accident with your boat, this liability cover pays for damages to the other person’s vehicle or property.
Collision coverage
This coverage will pay for damage to the following parts if you are involved in a covered accident with another boat or object:
- Boat structure.
- Boat motor.
- Trailer.
- Permanent equipment.
- Portable boating equipment.
Comprehensive coverage
Comprehensive boat coverage will help to pay damages other than collision cover. These damages usually include fire, theft, or storms. The parts of the boat that are covered include:
- Boat structure.
- Boat motor.
- Trolling motor.
- Trailer.
- Permanent equipment.
- Portable boating equipment.
Uninsured motorist coverage
If you or someone on your boat is injured in an accident with an uninsured or hit-and-run boater, uninsured motorist coverage will pay for injury and any damages.
Underinsured motorist coverage
If you are involved in an accident with an underinsured boater, this insurance will help you to pay for damages or injuries.
Medical payments coverage
This insurance will help cover medical bills if you or anyone else is injured while operating or occupying your boat.
Special add-ons
As a boat owner, you can purchase additional cover under boat insurance.
Marine gear can be expensive, so if you use special equipment while on the water, you will want to make sure that these items are financially protected as well.
Many insurance companies will let you add coverage for items such as:
- Boat trailers.
- Towing.
- Special equipment such as fishing gear.
- Boating accessories such as radar.
- Dock contract liability.
- Fishing guide coverage.
- Ice and freezing coverage.
- Mechanical breakdown.
- Personal property.
What Does Boat Insurance Not Cover?
Your boat insurance will not cover all of the damages to your craft. Also known as ‘exclusions’, the following are events that your insurance provider won’t cover.
Wear and tear
Your boat will deteriorate over time, so it’s important to keep it in top condition at all times so that you can prevent a loss. Your insurance policy won’t cover corrosion, repairs, or replacements.
Infestations
Most boat insurance policies will exclude any damage caused by insects, animals, and mold.
Marine life
Basic boat insurance policies will not cover damage done by marine animals such as sharks, octopi, whales, and other sea creatures.
Faulty machinery
If your boat machinery has deteriorated due to age, lack of maintenance, manufacturing, or mechanical defects, your basic boat insurance will not cover these events.
Accessories
When it comes to life jackets, GPS systems, anchors, and navigation gear—your insurer is not likely to cover the cost of any damage to these items.
Unnamed operators
Like auto insurance, your boat insurance policy will only cover certain named drivers on your policy. Anyone who has not been named on your insurance policy will not be covered.
Navigation limits
Most boat insurance policies will cover a specific geographic location or region. If you sail out of these navigation limits your boat insurance will not be active.
Competitions
If you enter high-speed races with your boat, your boat insurance policy is not likely to cover you. You can talk to your insurance agent about special cover in these circumstances.
When Should You Get Boat Insurance?
Because unforeseen events can take place at any time, it’s always a good idea to at least have liability insurance in place for your boat.
Here are some specific reasons why you may need to have boat insurance in place:
Financing your boat
If you are wanting to finance the purchase of your boat, your bank will require you to provide proof of insurance. The policy that they require, will need to cover the full value of the boat.
Mooring in a port or marina
If you are wanting to moor your boat, most ports and marinas will require you to have fairly comprehensive insurance in place to do so.
You will usually need to provide proof of insurance before you can sign a contract for a slip or mooring.
You live in a state that requires insurance
Currently, the only states that require you to have boat insurance are Utah and Arkansas. Always check with your insurance agent whether you require boat insurance in your state.
Key Point: Make Sure You Have Year-Round Coverage You may feel that it’s unnecessary to have year-round cover if you are only using your boat for a few months. The reality is that the unexpected can happen at any time. Your boat may also be at risk of out-of-the-water damage—for example, fire, hail, theft, and vandalism. Most insurance companies offer discounted rates if you carry boat insurance year-round. |
How Much Does Boat Insurance Cost?
Boat insurance can cost anything from a few hundred to a few thousand dollars.
For example, for a really large or expensive boat, the insurance premiums are typically between 1 and 5% of the total value of the boat.
What Factors Affect the Cost of Boat Insurance?
There are a few key factors that will affect your boat insurance costs. Many insurance companies will consider where you live to calculate how much boat insurance should cost.
Generally, boat insurance rates will be less for inland states and shorter boating seasons, as opposed to states with coastlines and longer boating seasons.
Other factors that will determine the cost to carry boat insurance include:
- Value of the boat.
- Boat length, age, condition, and category.
- Engine type.
- Place of mooring.
- Location of use.
- Experience of the boat owner.
- Owner’s past claims.
- Boat’s ownership record.
The insurer may also factor in your driving record and whether you have taken a boating safety course.
Agreed value versus actual cash value policy
When you choose your insurance cover, you can select from agreed value coverage or actual cash value coverage.
With agreed value coverage, the value of your boat is decided at the time you buy the boat policy, and is generally a more expensive insurance option.
When it comes to actual cash value coverage, the value of your boat is decided at the time of a loss—such as a fire or theft, for example. This insurance is generally less expensive.
When deciding whether to choose between agreed value or actual cash value coverage, you will need to consider how much you want to be paid out for your boat in the event of a loss.
If you choose actual cash value coverage, you will be paid out less for your boat than if you had taken out agreed value coverage.
In other words, you will not be paid out the replacement cost of the boat.
How to Get Boat Insurance Discounts
If you are looking at year-round insurance for your boat (which is a good option), you will definitely want to try and pay as little as possible for the best insurance.
To reduce boat insurance costs, you can:
- Bundle multiple policies such as boat, auto, and homeowners insurance.
- Fit Coast Guard-approved fire extinguishers.
- Keep a clean driving record.
- Try to claim from your insurer as little as possible.
- Complete boat safety training.
- Choosing a diesel-powered boat.
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