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Insuring Your Boat

Sunny skies, warm waters, the wind beneath your sails--and boat insurance? Insurance is probably not the first thing that comes to mind when you set sail on the open seas, but it's still important. And even though insuring a boat is a lot like insuring a car, there are some unique issues to address. Here are some questions and answers to help you out.

Do you need to purchase boat insurance?

Most homeowners policies provide a small amount of coverage (e.g., $1,000) for physical damage to small boats while they are stored at your home, but not when they are on the water. Your policy may also provide a limited amount of coverage for protection against personal liability claims resulting from the negligent operation of your boat. Liability coverage for mishaps involving your boat may be expanded through the purchase of a watercraft endorsement for your homeowners policy.

But if you want additional coverage for your boat, you'll want to purchase boat insurance. And in some cases, you may not even have a choice: Your state may require you to carry a minimum amount of boat insurance, and many marinas and yacht clubs won't allow you to dock your boat unless it's insured.

What's covered under a boat policy?

Although boat policies vary, the two main coverages are for physical damage and liability claims. The physical damage portion of a boat policy pays to repair or replace your boat if it is damaged or destroyed by a covered peril (e.g., fire, lightning, windstorm, hurricane, explosion, collision, capsizing, sinking, vandalism, theft) listed in your policy. As for liability coverage, boat policies typically respond to bodily injury and property damage claims, as well as cover the costs of defending those claims. Similar to auto insurance policies, boat policies may provide medical payments and uninsured boat coverage.

What is a warranty?

When you buy boat insurance, it is often subject to one or more warranties, which are much like promises made by you to the insurer. If you break one of these promises when a loss occurs, the insurer may deny your coverage. A common warranty is the navigational warranty, which relates to the bodies of water that a boat can be used on. For example, a policy might only cover your boat while it is being operated on inland bodies of water (e.g., rivers, lakes) and coastal waters within a certain area. Or, it might limit boat usage to a specified body of water and the area immediately surrounding it.

How much does it cost?

The cost of boat insurance depends on a variety of factors, such as:

  • The age, size, type, and power of your boat
  • When and where you use your boat (e.g., coastal areas during hurricane season)
  • How safely you store your boat when it is not in use
  • Your level of boating experience
  • Whether you use your boat seasonally or year-round

For the most part, the larger and more powerful your boat is, the more expensive it will be to insure. But prices do vary, so it pays to shop around. And keep in mind that some insurers will offer discounts (e.g., safe boater, use of protective devices, multiple policy).

What about yachts?

The insurance industry defines a yacht as a vessel that is 26 feet or longer in length. Yacht policies are similar to boat policies in that they provide coverage for physical damage (known as hull insurance) and liability claims (known as protection and indemnity coverage), along with optional coverages (e.g., legal defense, medical payments) and limitations.