Important Insurance Terms and FAQ

TRUSTED SOURCE SINCE 1989

Need Help? Call us at (281) 398-0001 or (800) 324-8577

Start with the Basics

Let's start by describing the two basic sections of a typical boat
or yacht insurance policy: physical damage and liability. The
physical damage section covers accidental loss or damage to
the boat and its machinery. This not only covers the hull and
the engine(s), but also the sails and other equipment on board
that are required to operate the boat.

The liability section, sometimes referred to as Protection &
Indemnity, covers your legal obligations to third parties. This
legal liability can arise from bodily injury or loss of life, or
damage to someone else's property, as a result of the
ownership or operation of your boat. Liability coverage also
helps pay for your legal defense if you are sued for a liability
that may be covered under your boat insurance policy.

Physical Damage — What Losses are Covered?

Physical damage coverage generally pays for repairs to your
boat that are necessary as a result of damage caused by a
wide range of perils. The best policies provide "all risk"
coverage, which means that if the cause of loss is not
specifically excluded, it is covered. Typical causes of loss that
are covered include: weather-related perils such as wind, rain,
hail, lightning and wave action; fire; loss or damage caused by
theft or vandalism; and collisions with docks, submerged or
floating objects or other boats. It is wise to select a policy that
continues to cover your boat while it is stored on land, or while
you transport your boat over land by trailer.

The boat owner has the responsibility to maintain their boat,
and so normal wear and tear is often excluded under a boat or
yacht policy. The number and type of physical damage
exclusions vary from company to company, so take the time to
compare to avoid surprises later.

Loss Settlement - Agreed Value vs. Actual Cash Value

When comparing physical damage coverage, the most
significant difference that can be found among boat or yacht
insurance policies is whether the coverage is based upon
"agreed value" or "actual cash value" (ACV) loss settlement.
Agreed value policies normally pay the amount shown on the
policy if the boat is considered to be a total loss. Under such a
policy, damage resulting from a partial loss is generally paid
for on a replacement cost (new for old) basis, less your
deductible; that is, physical depreciation will not be factored
into determining the value of the lost or damaged items.
However, some items that are subject to higher amounts of
normal wear and tear, such as canvas, sails, trailers and some
machinery, may be subject to allowance for depreciation in the
event of a covered loss.

An actual cash value policy provides less coverage than an
agreed value policy, but generally at a lower cost. An ACV policy
provides coverage up to the current market value of the vessel
in the event of a total loss, taking into account depreciation and
the condition of the boat at the time of the loss. Payments
made for partial losses are usually reduced based upon
physical depreciation of the lost or damaged items, and the
policy deductible is also applied.

While an agreed value policy typically costs the boat owner
more, and provides broader coverage, an actual cash value
policy may suit the needs of an owner looking for an
economical alternative. Your insurance professional can
explore these options with you.

Personal Property and Towing & Assistance

Two additional coverages often found in boat and yacht
insurance policies are: Personal Property coverage, and
Towing & Assistance coverage. Personal Property coverage
includes such items as clothing, personal effects, and sports
and fishing equipment belonging to you or your family while
those items are being loaded/unloaded and while aboard your
boat. Similar to physical damage coverage, there are
exclusions that vary from company to company, so it pays to
compare.

Towing & Assistance coverage reimburses you for the costs
that you incur when you need emergency assistance for your
boat, and you and your boat are not in immediate danger.
Some examples of emergency services that you may need
which may be covered include: towing to a place where repairs
can be made; delivery of fuel, oil or parts; or emergency labor
while underway. Check before hand to determine whether a
deductible applies to this coverage.

Liability — Other Important Coverages

The liability section of a comprehensive boat insurance policy
provide many coverages that are important to boat owners.
Coverage for the removal or disposal of the wreck of your boat
is important to have, especially if the wreck is deemed to be a
hazard to navigation. Boat owners may also be responsible for
any containment and clean-up expenses resulting from oil
pollution or contamination caused by their vessel. It's important
that your boat or yacht insurance policy covers your liability for
those clean-up expenses, which could add up to a
considerable amount. If you ever intend to borrow someone
else's boat, confirm that your liability coverage extends to the
other boat. This is called "non-owned" boat liability coverage.
Finally, boat owners who employ paid crew members should
ensure that their policy covers their liability to the crew under
the Jones Act and General Maritime Law.

A good policy will also provide a separate coverage for your
liability under the Federal Longshoremen's and Harbor
Workers' Compensation Act. This will cover your statutory
liability to temporary shore-based workers, such as a mechanic
or marina employee, if they become injured aboard your boat.

Most boat and yacht policies exclude coverage while your boat
is chartered to someone else, or used to carry passengers for a
fee. Under the right circumstances, a good marine insurance
company may extend your coverage to include those
situations. So ask first to ensure that you will be properly
protected.

Medical Payment Coverage

You should verify that your policy has an adequate limit of
coverage for Medical Payments. Medical Payment coverage
will pay for first aid treatment, ambulance, hospital and other
costs that result from someone being injured on your boat,
even if you are not legally responsible. It is important to
ascertain whether the coverage also applies while someone is
boarding or leaving boat, and while being towed behind your
boat, such as while water skiing. Check to make sure that
injuries to you and your family are also included in this
coverage. Given equal amounts of insurance, coverage on a
"per person" basis may be preferable to coverage on a "per
accident" basis.

Uninsured Boater Coverage

Since boat liability insurance is not mandatory, there are many
boaters operating without liability coverage. Uninsured Boater
coverage is designed to compensate you for injuries to
persons aboard your boat that are caused by an operator of
another boat who has no liability insurance. If you are legally
entitled to recover damages from the other uninsured boater,
or if you or your guests on your boat are the victims of a hit-and-
run boater who cannot be identified, this coverage can help
ease the financial impact of those injuries.

Factors Affecting the Cost of Insurance

The underwriter must consider many factors when determining
the rate (or premium) to charge for a boat policy. The most
common determinants are: value, length, and age of boat; type
of boat (i.e. power, sail); type of engines; mooring location;
intended area of navigation; previous boating experience and
claim history of the owner; and deductible amount. Sometimes
the underwriter will also consider the automobile driving record
of the owner(s), and whether they have taken any safe boating
courses.
There are several ways that you can reduce the cost of your
boat insurance. The most common way is to select the highest
deductible amount that you are comfortable with. In general,
physical damage deductibles start at around 1% of the insured
value of the boat, and can be increased to sometimes as much
as 5%. Each higher deductible amount reduces your insurance
premium. Think about how much you could affordabely pay out
of pocket if a loss occurred.

Sample Policy Terms and Coverages

Q: Does your Boat Insurance policy have any offshore
mileage restrictions?

A: No

Q: Exactly what type of insurance does Tom Stewart
Insurance offer?

A: In the Marine Industry we offer, Boat, Yacht,

Charter Boat, Boat Dealers, Boat Manufacturers,

Marina policies. We also offer all associated

coverages that may be needed such as Employee

Group Benefits, Workers Compensation, etc. We

also

have personal products such as Auto, Home,

etc.

Q: Will you insure boats that are chartered?

A: We

offer policies for boat owners who charter

their

boats to others for private pleasure purposes

with six

passengers or less. Whether the

chartering exposure

is occasional or full time, we

have a policy to suit

your needs. Eligibility for our

charter policies is

subject to underwriting criteria.

Q: How do I obtain an insurance quotation?

Call (800) 324-8577 and speak to one of our staff.
Clink this link Instant Boat / Yacht Quote .
By clicking the link you will in most cases instantly
get a quote from ACE Recreational Marine. Our staff
will also quote your boat/yacht through Zurich, AIG
and possibly other carriers depending upon the size
of your vessel and/or the location.