Boat Insurance: Uncertain Waters for Vessel Owners

Unless your vessel is small, slow and inexpensive, whether you should purchase Boat Insurance is not subject of debate. You should.

While most states don’t require insurance for watercraft, many marinas do, and if you’re financing the purchase of a boat, your bank will definitely require coverage. Moreover, boat insurance is invaluable protection for the investment you’ve made and against the liability you could incur.

Now how much you’ll pay for Boat Insurance and whether you’ll even be able to obtain coverage are very different matters. Here we’re navigating uncertain waters.

Property and Casualty (P&C) Insurance in general is in the midst of a hard market right now, and the marketplace for watercraft is no exception. Largely due to successive years with multiple catastrophic weather events, insurance pricing is up while availability is down, and that means underwriters are being highly selective regarding whom they choose to insure.

Since last year, five carriers have ceased providing yacht coverage: American Reliable, Brit, Falvey, Ironshore and Pantaenius. Given the hurricane forecast for 2021 after a record-breaking 2020, they’re probably not regretting their decision.

Among the carriers who continue to offer boat insurance — including Chubb, Geico, Markel, Progressive, Safewaters, Travelers and some Lloyds syndicates — changes in underwriting guidelines and requirements have become extremely stringent. Details vary from carrier to carrier, but in general terms, here are some of the changes we’re seeing:

• Tougher survey requirements — Carriers are no longer looking at surveys over 2 years in age.
• Ownership requirement — Prior ownership of a vessel within 15 feet in size of the vessel that you are trying to insure is becoming commonplace.
• Universal named storm deductible — Once applicable only if damage to the vessel resulted from a named storm occurred in Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina or the Bahamas, it now applies no matter where the damage occurred.
• Vessel age is becoming an issue again — Vessels that are over 30 years old and over 40 feet in length have become extremely hard to place in this hard marketplace.
• Seaworthiness clause — Where once an implied warranty required only that the vessel be classified as seaworthy at the inception of the policy, it many new be required that it remain seaworthy throughout the entire policy period.
• Multi-hull vessels are becoming harder to insure, especially south of 31 degrees.

So what’s a boat owner to do?

Before we answer that, let’s address what Boat Insurance covers.

Coverage and Cost 

Homeowners Insurance can provide limited coverage of damage that occurs on your property or inland waterways — typically up to $1,000 or 10% of your home’s insured value — but most do not cover damage that occurs on the water beyond a coastal inlet. Nor does Homeowners Insurance cover liability for damage your boat does to others, unless the coverage is added as an endorsement.

Standard Boat Insurance policies cover accidental damage to or destruction of a policyholder’s vessel resulting from a collision, striking a submerged object, fire, theft, vandalism, windstorm or lightning.

Other Boat Insurance coverages, as outlined by the Insurance Information Institute, include:

• Damage caused to someone else’s property;
• Medical payments for injuries to the boat owner and other passengers;
• Bodily injury caused to another person;
• Guest passenger liability for legal expenses incurred by someone using the boat with the owner’s permission;
• Hurricane haul-out provisions to keep the boat out of harm’s way;
• Full salvage coverage, including wreck removal;
• Consequential damage coverage for major events, such as sinking or a fire;
• Fuel spill liability protection for cleanup or third-party damage due to accidental discharge;
• Personal effects coverage for expensive equipment, such as watersports toys or fishing gear;
• Ice and freeze coverage for damage to engine and water systems.

Optional coverage is available for trailers and accessories at additional premium.

Boat Insurance does not cover normal wear and tear; defective or damaged machinery; damage caused by marine creatures, including zebra mussels; or damage from insects and mold.

As for cost, insurers base pricing on factors including owner experience; the boat’s make, model, size, speed/horsepower and market value; as well as its cruising area. No matter that many boats built before 1990 are of superior construction and in excellent condition; if your boat is more than 30 years old, underwriters will be reluctant to insure it.

What You Can Do 

Here are six tips for reducing risk, improving marketability and containing costs:

1. Start by working with a reputable agent or broker who knows boats and boating. A knowledgeable, experienced insurance professional can:

• Work with underwriters who are more likely to consider a well-crafted application from an established agent;
• Advise you on whether you’re better off opting for coverage based on agree value or actual cash value;
• Ensure you receive all discounts or premium credits for which you may be eligible, whether through passing an approved boater safety course or insuring with the same carrier who provides your home and auto coverage – the process commonly known as “bundling.”

2. If you’re buying a boat, first make sure you have insurance in place. You don’t want to make an offer and then find out you’re unable to get coverage.

3. If you don’t already have a boater safety certificate, enroll in a certified course. In addition to reducing your risk of an accident, earning your certificate in a state-approved course may make you eligible for a premium credit or discount.

4. Consider moving your boat to a more hurricane-friendly area during storm season. Moving the boat north of 31 degrees north latitude for storm seas will result in lower premiums and more markets willing to provide coverage.

5. Limit your cruising area. There is no reason to pay for the whole east coast if you are only cruising the Chesapeake Bay.  Some companies offer more targeted navigation areas at a lower premium.

6. Inform your agent of any changes that may affect your coverage prior to renewal. Carriers sometimes mail a policy directly to the policyholder, before we’ve had a chance to review it. We want to ensure that there are no gaps in coverage and add any necessary endorsements.

About the Author

Jonathan Horton 
Sales Manager, Jack Martin & Associates Yacht Division
Avon-Dixon Insurance Agency, an Alera Group Company

Jon Horton grew up working in his family’s marina and service yard in Alabama, and moved to Annapolis, MD, to pursue a career in yacht insurance. He has more than 16 years’ experience serving boat owners through the Jack Martin and Associates Yacht Division of Avon-Dixon Insurance Agency, an Alera Group Company. A boat owner himself, Jon is Program Director of the Mid-Atlantic Mariners Club.

Contact information: 

•  jon.horton@jackmartin.com
• (443) 336-6838
• Connect with Jon on LinkedIn