Boat insurance, why do we need it?
It would be easy to presume that most boat owners have an insurance policy however, this really isn't the case. As you may well be aware, it is a legal requirement to have insurance on a road vehicle but the legality of boat insurance varies greatly. Why's that you ask? Boats are one of the last forms of truly free transport but this all depends on where you are geographically located and what your intentions for the boat are.
WHY? - Common Scenarios covered by insurance
Just because you don't need insurance doesn't mean you shouldn't have it. Below are some classic examples of things often covered by boat insurance policies:
Court Fees - Unfortunately nowadays we no longer settle disputes in Chuck Norris style fist fights, instead, we settle them in long drawn out, expensive court battles and some insurance policies cover the legal costs.
Fuel Spillage - Both oil and fuel causes damage to the environment and can often require specialist equipment and man hours to clean up. You may be slick but your not slick enough to get away without paying for the cleanup!
Medical Expenses - Crashing a boat can cause a lot of carnage and as you can imagine, people often get caught up in the wreck. Ouch! Some insurance policies cover medical costs to both the people onboard your boat and/or a 3rd party vessel. So don't become a castaway and make sure this is on your policy!
Salvage Assistance - You may have thought a boat ceases to be your problem if it's sitting at the bottom of the sea and no longer visible, but you'd be wrong! Out of sight isn't out of mind. Paying for the recovery of your boat after an accident can cost more than the price of the boat itself!
Theft - Unfortunately gutter dwelling hood rat cat burglars are everywhere and short of leaving a bear trap for them, there's only so much you can do to protect your boat. It's best to have a policy that covers contents and god forbid, the theft of your boat!
Fire - I'll take you to burn! The worst thing about fire is its tendency to spread. It's not just the cost of your boat burning because you left the oven on for 2 weeks. It's the cost of the one next door and the one next door to that and the one next door to that- you get the point!
Watersports - You'll be relieved to hear that you can also be covered for damage to people or property whilst you are undergoing activities on the water!
Collision Damage - The awkward moment when you don't see that giant pole from a mile away. Collision damage is covered in most policies but you can just choose to cover third party collisions.
Breakdown Insurance - You're going to be pretty damn upset if you've got a beautiful weekend away planned and your boat won't start. Likewise, you'll be pretty upset if your at sea and need to be towed. Some insurers will cover the cost of breakdowns, emergency repairs and recovery.
When do you need boat insurance?
We've looked at some of the basic aspects of boat insurance, so now let's have a think about scenarios where boat insurance may be needed. Always remember, insurance is merely financial protection; experience on the water is most important in staying safe. When it comes to the sea, the elements are often sudden and can be catastrophic; always be prepared!
Boat Insurance Requirments In the UK
It is often believed that in the United Kingdom you can buy a boat with no experience and 5 minutes later be adventuring off to sea with a plastic parrot and pirate patch. This is technically true, but only if the boat is not going to be used commercially or to endanger the life of others. Legally speaking you can set sail but remember you may waste the time and money of crucial voluntary lifeboat organisations (or die). However, there are some government rules and guidelines that need to be followed in order to avoid prosecution in the UK highlighted here >>
Note that insurance for sea-going vessels isn't mentioned. In the United Kingdom, insurance is only needed when it is a requirement by the land owner, marina or governing bodies of inland waters.
BOAT INSURANCE REQUIRMENTS IN THE USA
Similar to the United Kingdom, for inland waterways, only certain states in America require you to have a third party liability policy. Whether you need a policy may depend on what type of boat is owned and the engine power e.t.c. as well local state laws as previously mentioned. America is similar to the UK in the sense that nearly all marinas make insurance a requirement for a mooring or passage. A standard homeowners policy may provide insurance for smaller vessels but won't often cover everything needed. Like the UK, to cruise or sail about on the sea does not require insurance although it should be considered for the reasons below. State specific you may require a safety certificate before you can take to the water see here >> http://www.americasboatingcourse.com/lawsbystate.cfm
Reasons For Needing Boat Insurance
Borrowing money for a boat
If you have borrowed or plan on borrowing money to purchase a boat then it may be a requirement by the lender to insure it. A lender will want to know that the value of the boat is protected fully because if it isn't, a borrower is more likely to default on the loan payment (given the boat is now sitting at the bottom of sea!) It is also worth noting that a full boat survey will generally be required when borrowing money is concerned. Regardless of insurance and for obvious reasons, a lender doesn't want to put money into a boat which may have structural problems and is likely to sink.
Marina or landowner requirements
Marinas do not want uninsured boats taking up moorings next to boats of value. The minimum they will accept is third party insurance. It is a simple game of statistics; if there is a boat without insurance next to two expensive yacht's, then given time there is a probability that damage may occur from the non-insured boat. Why should the marina care? If the damage to the expensive boats is not paid for because the owner has done a runner, then who is to blame?! It would be classed as neglect for the marina to not make sure all boats are insured. If a boat owner can't afford insurance, how can they afford the mooring fees for a boat? Port authorities and harbour masters don't want vessels that are not insured passed through their controlled waters.
Full-comp vs third-party
Each individual insurance provider will generally have their own name for the policies they provide. For example; "agreed hull value, liability only" which refers to third party insurance. Each policy will also come with additional add-ons that can be purchased. You may think something is included in a policy as standard but always check. Boat insurance can be loosely separated into two types - fully comp and third-party.
Third Party Insurance
Third party boat insurance covers damage that has been caused by the owner, guests or crew against a third party boat. The basic principle being that if you crash your boat into something expensive, your insurance pays for the damage incurred to their boat but not yours. Persons, property and assets are often covered in this policy. Some policies also cover you if your boat damages another vessel without you being present, e.g. in the case of a fire, a falling mast or sinking. Some policies even cover the legal fees that can be incurred due to a court case. Third party Insurance policies vary greatly and will need prior research before you take one out to see if it suits your needs.
- Third party insurance is fairly cheap.
- No marine survey required.
- Will only require basic details.
- Can often be set up over the phone or on the internet the same day.
- Will allow you to have a boat in most marinas.
- Will give you a slight peace of mind that you only stand to lose your boat and not a lawsuit/ your life savings.
Full comp is the Rolls Royce of boat insurance and for this reason, you can expect to pay and arm and a leg for it. Most insurance providers will not insure a boat fully unless it has had a full survey.
Small vessels are often bought whilst in the water, and for this reason, it may not always be possible to immediately have a marine survey completed. This could be due to the finances of the new owner (surveys can be expensive) or not having the experience to move the vessel safely. Ironically, in order to insure a boat fully you need to have the boat hauled out the water, to which you may not want to do without insurance!
- Full peace of mind - your boat is fully protected against theft, fire and damage to persons or property.
- You can live on your boat and know that you will always have a home no matter what happens.
- Dependant on your policy you should get the agreed value or market value back after an incident.
Lastly here are some things to consider:
- If you make a claim, do your insurance premiums increase?
- Are repair and salvage costs combined, and if so, do they go over your policy limits?
- Is your boat covered in every location?
- If the insurer offers fully comp and doesn't require a full survey - why not? Alarm bells should ring.
- Does the policy offer agreed value or market rate?
- If the boat or contents is repaired instead of being replaced, who gets to decide who's completing the work?
- Does the policy specify what the boat is used for? E.g. inland, offshore, night time, racing etc?
- Would boating related qualifications lower the cost of insurance?
- Is your boat covered out of the water? Haul-out, winter storage etc.