It’s the time of year every boat owner looks forward to — getting their prized possession in the water and prepping it for the season ahead. But, aside from the cleaning and equipment checks, it is also important to regularly check your coverage to make sure your vessel, and your other assets, are properly protected against the risks that come along with the fun on the open water.
The Basics
Typically, insurance for your vessel operates very much like your auto insurance. It includes property coverage for damage or loss to the craft itself, and liability coverage for third-party claims asserted arising out of ownership and operation.
How Much Insurance Do I Need?
As with most insurance, boat insurance typically has specified limits of maximum amounts that the insurer will pay in the event of damage or loss to the craft and in the event of a liability claim. Any costs, expenses or liability that exceed those specified limits would not be covered.
As to property coverage for the boat, if an owner wants to minimize the risk of going out of pocket for any repairs/replacement of the vessel, it is important to review your insurance limits regularly, and seek expert help as needed, to ensure they strike the balance of having sufficient insurance to cover loss to the watercraft while also avoiding significantly over insuring the potential loss and paying premiums for coverage you would never need, even in the event of a total loss. In addition, it is quite likely there could be a contractual requirement to maintain sufficient insurance on the vessel either through a lender or marina.
On the liability side, to the extent that liability for a third-party claim for bodily injury, death or property damage from a boating accident exceeds the applicable limit of liability on the insurance policy, personal assets could be at risk to satisfy any judgment. Because of this potential for personal exposure, it is important to review your limits regularly to feel comfortable that you carry enough coverage to protect your assets according to your own individual risk tolerance. This is especially critical given that boating inherently carries the risk of serious accidents, which may result in significant personal injury or even death. In the current legal and financial climate, such incidents can expose individuals or organizations to substantial monetary liability. This coverage can be maintained in a combination of primary and excess/umbrella insurance policies that together would provide sufficient protection. But it is essential not to assume that any personal excess or umbrella coverage you might already have would automatically apply to boating-related liability. Again, look at the policy language to ensure you have the coverage you expect.
Unique Concerns
This type of insurance also has some unique concerns that may require specific attention:
- Environmental
- There’s always a risk that boating activity could cause a leak of fuel or other pollutants, creating a risk for liability and/or expense. To the extent you want to avoid paying for those potential expensive items yourself, you may want to check whether your policy includes coverage for this.
- Rental
- Leasing your craft for third-party use through apps and other platforms is becoming increasingly easy and common. However, you need to make sure that those arrangements are clear in terms of what parties and insurance companies are responsible for loss and damage and that the required insurance provides sufficient coverage for this risk.
- Crew
- If your vessel requires professional crew, whether they are employees or independent contractors, your insurance program needs to be tailored to recognize the risks associated with their services.
- Application Pitfalls
- As with all insurance, insurers issue coverage based on the information provided in an application. If the information in that application turns out to be inaccurate (such as where the boat is docked), the coverage could be jeopardized. So, even though it might be cheaper to obtain coverage based on the vessel being primarily docked in Michigan, if its main home port turns out to be Florida, coverage — from hurricane or otherwise — could be lost when needed most.
- Marina Contracts
- Most marinas or yacht clubs where a vessel is moored will require their facility to be named as an additional insured. As some facilities will reject a particular carrier, it is important to discuss your proposed carrier up front. Also, the marina contract should be carefully reviewed for any language that shifts responsibility for defense and payment of claims to you and your insurance company, even when the cause of the accident and responsibility for the resulting damages rests with the marina and/or its personnel.
- Additional Insureds
- Many vessels are owned by entities like a trust or LLC. Your insurance policy should be reviewed to ensure all potential responsible parties are included as additional insureds.
