While most people would not dare drive without adequate car insurance, several boaters carry boat insurance policies that are often inappropriate to what they really require. Some boaters even care less about insuring their vessels that they may not have insured their properties at all. Risks associated with boats may be different from automobiles and these are often overlooked by the owners. Boats may not travel as fast as cars but still may carry risk even while on dock. Due to the relatively larger size of boats, damages also usually arise from their wakes and possibly from oil spills. To protect owners from outrageous expenses resulting from these accidents, vessel insurance policies are highly recommended.
Components of a boat insurance policy
The insurance policy for vessels is generally divided into two major components. The first component covers for the hull and machinery, and the second component pertains to protection and indemnity. The latter is analogous to the automotive liability insurance component of car insurance policies, while the former is similar to the collision and comprehensive coverage of the automobile.
The hull and machinery component covers the repair or replacement of a damaged or lost vessel. Damaged parts such as engine, trailer, and other attached equipment are covered. This coverage is granted irrespective of the reason why the damage occurred subject to some limitations. Loss of the vessel due to seizure by authorities may not be covered on account of legal implications. Normal wear and tear conditions are not covered as well in addition to damages arising from negligence leading to poor maintenance.
Actual cash values are commonly appropriated by insurance companies to the insurance holders in case of vessel loss. This actual value is reduced based on depreciation calculations. Other policies, on the other hand, appropriate the agreed value, which is predetermined and agreed upon during the issuance date of the policy. This agreed value is based on prevailing marine surveys that the company collects. Policies that are based on agreed values usually pay better than actual cash value claims; however, premiums paid for the former cost more.
Coverage for hull and machinery can be further classified into two types. The first type of boat insurance policy covers named hazards, that is, the possible damages particularly cited in the terms and conditions of the contract such as sinking, theft, fire, and others. Although less desirable, this type of policy is often the only kind available for foreign cruises. The second type is referred to as an all risk policy, which is broader in coverage. An all risk policy covers any kind of loss except for some common exclusions such as loss or damage due to war, illegal activities, commercial use, or racing.
The protection and indemnity component covers for expenses when facing legal battles arising from the physical damage or injury caused by the insurance owner’s vessel. In addition to the basic legal expenses, this component also pays for the amount awarded to the defense lawyer for a successful lawsuit subject to a certain policy limit. On the other hand, if the insurance company is able to arrange for a settlement out of court, then the negotiated amount is also covered.
Protection and indemnity covers for damages caused by the wake of the insurance owner’s boat. Damages resulting from collisions or fire spreading from the owner’s boat to the other boats are also covered. This component also pays for medical expenses of affected passengers and possibly for their personal effects. Medical expenses during hospitalization including room and board fees due to the sickness or injury acquired by the passenger while on the boat are also paid by the insurance company.
Major types of vessel policies
The two policies commonly offered by insurance companies are the boat and yacht policies. The major difference between these types lies on their flexibilities. While the yacht policies offer a wide range of options that can be adjusted to suit a particular requirement, the boat policies are simply offered with conditions right off the shelf.
Boat policies pay the actual cash value in case of loss, whereas yacht policies pay the agreed value. For the yacht policy, several items can be negotiated such as inclusions, exclusions, and possibly premiums, which are not possible in a boat policy. Insurance owners who hold a boat policy have really very few options other than a choice of protection and indemnity limit amounts. Coverage amounts are also limited and they would usually not exceed more than $500,000.
Other variations of vessel insurance policies are tailored for motorboats, narrow boats, houseboats, as well as speedboats. Rigid inflatable boats (RIB) also have specific insurance terms. Although not considered as a boat, jet skis also qualify for vessel policies.
Factors that lower down boat insurance premiums
Similar to boat insurance policies that apply for individuals, premiums paid for vessel policies are dependent on the age of the boat. In this industry, new or young boats are those which are less than 10 years old. As vessels age beyond this limit, premiums can easily increase due to the growing risk associated with the property. This age factor is also relative depending on the type of boat being insured. For instance, wooden boats that would easily be damaged due to collisions and other accidents carry greater risks, thus, have more costly premiums. Vessels designed for high speed travel also cost more in premiums.
The engine type that powers the vessel also affects the cost of the premium. Boats with diesel engines cost less in insurance compared to boats powered by gas engines. Furthermore, engine placement also affects the cost. Outboard motors are less expensive than gas engines placed inboard.
Vessel insurance policies require that all the legally mandated equipment be present in the boat. Merits are also given to boat owners who install additional safety equipment on top of those which are basically required. Lowered premiums are given to those which have VHF (very high frequency) radio, GPS (global positioning system) devices, and extra fire extinguishers.
Discounts are also given to owners who have sound boating experience. Completion of boating safety lessons is also a plus and could potentially lower down the premiums. Owners who have a secure place for keeping their vessels are also awarded with reduced premiums.
In summary, vessel policies work like other familiar policies, that is, lower premiums are provided for properties with lesser associated risks. For the boat insurance policy owner, adequacy of the terms as well as the resulting cost would assess the value of the insurance features, which he can use to compare with other insurance providers.