As boat owners, having the right kind of boat insurance can mean the difference between peace of mind and costly legal headaches.
True, you may never get involved in an accident or get entangled in an incident that requires you to pay significant settlements. But why take the chance? Why wait until a collision on the high seas or, worse yet, a serious bodily injury to you, or a third party, forces you to see the benefits of boat insurance?
Reliable boat insurance requires careful consideration; the policy provider you choose is crucial.
At its core, a typical marine insurance policy involves two main aspects; liability and physical damage.
Liability (also known as Protection & Indemnity) refers to instances when the boat owners are required by law to pay compensation to third parties. Imagine a scenario where somebody incurs extensive bodily injuries as a result of a fire on our boat. The resulting medical costs and possible legal ramifications will require significant funds to offset.
The physical damage aspect covers loss and damage to the boat and its equipment. It involves everything from the hull and sail to the radar system and citizen band radios.
Remember, always ask your marine insurance provider to clarify the following points:
In The Event of a Total Loss or Theft, How Much Recompense Do I Receive?
This issue is at the very heart of marine insurance. Depending on the extent of damage and other factors at play, the policy provider can consider depreciated valuation (called Actual Cash Value) as a compensation package. The boat owner receives an amount of money that is at par with the current market valuation of the boat.
Agreed Value is the amount of money payable upon a successful claim, usually less than the cost of replacing the boat. An underwriter will usually state such provisions in the policy documents.
Total replacement is also an option. It’s when the owner receives a new boat of the same type. Certain conditions may apply, though. Certain policy providers don’t offer this option for boats older than two years.
In Case of Any Claims Regarding My Boat, Will That Affect My House Insurance?
It’s advisable to combine your boat insurance policy with your house and automobile policies.
A standard homeowner’s insurance policy usually extends coverage to small personal watercraft (PWC) under the “personal property” section, assuming that the boat suffers damage on your property. However, this coverage is capped at a specific amount, say, $2000.
Larger vessels like cabin cruisers usually need a separate insurance policy because most providers consider the boat length past specific measurements.
As a side note, ensure to ask the insurance broker to clarify possible entanglements. Common pitfalls include when a claim on your boat extends to your house policy.
Does The Policy Cover Emergency Towing and Salvage?
Ensure to ask about emergency responses. What happens when you run into trouble while at sea? Mechanical failure of the boat, fuel shortage, or any situation that requires a swift response? Does the policy foot the bill of towing from sea to the nearest local marina? If so, are there any stipulations?
Most policies also include the cost of salvage though some don’t. Be sure to get clarity from the broker.
Does vessel storage need to be in a locked place?
It’s pretty straightforward. As boat owners, we need to know the full coverage of the policy concerning storage conditions.
Some insurance providers may exclude damage sustained outside storage facilities or the owner’s residence. An example is when the boat sustains damage while on the road.
Choice of Storage Facilities as Defined by the Policy
The conditions under which damage or theft occur tend to determine compensation. For example, if the insured boat gets stored at a storage facility but gets stolen, the insurance company can cite negligence. Such negligence can void the terms of the original policy agreement.
Be sure to check that the language is abundantly clear in the policy documents.
In Case of Damaged Parts, will your boat get new spare parts?
Extensive physical damage to a boat can mean the insurance provider has to fork out significant sums of money to settle the claim. Most policy providers would rather pay for the cost of replacement than purchasing new spare parts.
However, as owners, it’s prudent to ascertain this kind of coverage in great detail. Replacing parts from an aftermarket might be cheaper for the policy provider but may not be in our best interests.
Spare parts bought from the aftermarket may not have a good warranty policy like that of the product manufacturer.
What Happens When an Uninsured Boater Causes an Injury or Damage?
Because boat insurance isn’t mandatory in Ontario, many boaters don’t bother to have one. If you get injured by one of these boaters, the amount of compensation you’re entitled to will depend on their financial circumstances. Such a scenario also applies in case they cause damage to your boat.
If, for example, you take out a $1 million policy on your boat, ensure that it’ll take care of your medical and repair expenses if the perpetrator of the accident is unable to meet those financial obligations. This coverage is crucial if you sustain a debilitating injury that prevents you from going back to work.
Does My Liability Extend to Watersports?
Many boat insurance companies don’t offer a policy for personal watercraft used for watersports. They see it as too risky.
Those that do tend to have exceptions for the kind of boats to insure. For example, certain classes of watercraft are more likely to incur damage due to their usage in rough oceans.
Does the Policy Cover Environmental Pollution?
Much like coverage for salvage, oil spills and the release of pollutants into the water can cause grave environmental concerns. Local authorities may require boat owners to pay for the costs of cleanup.
Ensure that your policy includes this issue as part of its coverage.
These are the main issues that an underwriter needs to address with clarity. The answers should enable the boat owner to determine what kind of policy is most suitable for them.