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A large investment in a boat deserves equally solid insurance protection. Apart from potential damage to your boat is the specter of a large liability lawsuit against you after a boating accident. And in these litigious times, anyone who appears to have assets can be a prime target for a lawsuit that could drain your resources.
Even if insurance is not a requirement in the area where you boat, it’s worth considering.
What Does Boat Insurance Cover?
Similar to auto insurance, boat insurance offers several different coverage types wrapped into one policy. Standard coverage types include:
Property damage liability coverage. This pays for damage that occurs when your boat hits another watercraft or someone’s property. It helps pay to repair or fix other boats if you have an accident, and also for property damage you cause. Suppose you’re pulling into a slip at a neighbor’s dock and you accidentally back into the cleats and mooring poles, causing damage to the dock. In this case, your boat liability insurance can reimburse your neighbor for the repairs needed.
Personal injury liability coverage. This coverage pays for others’ injuries where you’re at fault, including legal fees, court judgments and settlements. Note that a boat insurance policy typically doesn’t cover you if you are hauling your boat. If you hit or injure someone while towing, that coverage may come from your auto policy. Since injury lawsuits can be expensive, it’s good to have an ample amount of liability coverage. A good rule of thumb is to have enough liability insurance to cover what you could lose in a lawsuit against you.
Physical damage coverage. This coverage helps pay to repair damage to your boat resulting from an accident, or replace your boat if it is destroyed by fire, lightning or storms, or if it’s stolen. Whether your vessel is in the water or you’re trailering it across the country, damage can be covered.
Some insurance companies give you a choice between actual cash value coverage and replacement cost coverage. With actual cash value coverage, depreciation is factored into the value of your boat if it’s damaged, destroyed or stolen. Instead consider opting for replacement cost coverage in order to get full reimbursement.
Medical payment coverage. This coverage reimburses you for your own minor medical costs if you or your passengers are hurt in a boating collision.
Uninsured or underinsured watercraft coverage. While you hope your fellow boaters carry an appropriate amount of coverage, often some don’t. If an uninsured or underinsured boater hits your vessel, causing you injuries, this coverage can pay for your medical bills.
Optional Boat Insurance Coverage
If you use special equipment while on the water, you’ll want to ensure it’s financially protected as well. Many insurance companies will let boat owners add coverage for items such as:
- Fishing equipment
- Other boating accessories
- Personal property brought on board
Also, check to see if your policy covers fuel spills and wreckage removal in case your watercraft gets into an accident out on the water.
Additionally, some insurance companies may offer boaters “waterside” or roadside assistance coverage. If your boat breaks down on the water or you need mechanical labor when you’re stuck at the dock, roadside assistance can provide services to get your boat up and running once again.
Boat Insurance by Size
To determine coverage needs, insurers often look at the boat’s value, length and engine size, among other characteristics.
Small boats. If you own a small boat, for instance a Sunfish sailboat, your homeowners or renters insurance might cover it under the personal property portion of the policy. But check with your agent to see if your home insurance will extend to a small boat.
Boats. Pontoons, skiffs and other boats less than 26 feet long can generally be covered under standard boat insurance policies.
Yachts or larger boats. Vessels longer than 26 feet in length are generally considered yachts, and many insurance companies offer comprehensive policies for these vessels. There are also companies that specialize in coverage for yachts, including Chubb, Hagerty and Markel.
What Boat Insurance Won’t Cover
Although boat insurance protects your watercraft against a lot of calamities, there are some hazards it generally won’t cover, including:
- Insect or aquatic life damage
- Mold damage
- Ordinary wear and tear
- Watercraft manufacturer defects or faulty design
How Much Does Boat Insurance Cost?
The cost of boat insurance depends on many factors, but in general, you can expect to pay 1.5% of the value of your boat for coverage annually. For example:
- A skiff worth $25,000 may cost $375 a year to insure.
- If you own a motorboat worth $200,000, the cost could be $3,000.
- A 70-foot luxury yacht worth $5 million could cost $75,000 a year to insure.
The exact cost you pay will depend on factors such as:
- The characteristics of your boat such as value, length, age, engine type and category
- Location of anchorage and usage
- Boat owner experience level
- Boat insurance claim history
- Safety measures such as whether you have taken a safety course from the U.S. Coast Guard
- Driving history
Depending on the offerings of your insurance provider, you might be able to qualify for boat insurance discounts. Buying multiple insurance policies from one insurer, called bundling, can net you a price break. Many car insurance companies have bundling discounts for boats and autos. Some other discounts can include:
- Claims-free insurance history
- Completing eligible boat safety courses
- Owning a diesel-powered vessel
- Having fire extinguishers approved by the U.S. Coast Guard on board
Word of Caution: Don’t Operate A Vessel Under the Influence
Boat owners beware—operating a boat under the influence can come with severe consequences. Drinking alcohol or taking drugs while operating a boat can put a big dent in your wallet, result in jail time, lead to revocation of your driving privileges or, worse, lead to a fatal accident. In fact the leading cause of fatal boat collisions is alcohol consumption while driving, according to the US Department of Homeland Security and the US Coast Guard.
Even though operating a boat under the influence is illegal in all states and can lead to legal and financial ramifications, it can also impact your insurance. In some cases, your insurance provider may refuse to pay out a boat damage claim if you were operating a vessel under the influence. While the insurer may pay a liability claim, if there was one, not being reimbursed for damage to your own boat will leave you financially responsible for repairs or replacement. Plus, if your accident resulted from the use of alcohol or drugs, your insurer may decide to terminate your coverage.
Even if you don’t get into an accident but are convicted of a BUI, your insurance rate will likely increase substantially. Your insurance company could also cancel coverage. While you can request insurance quotes from other providers, you may end up paying a lot more than you bargained for.
Is Boat Insurance Required by Law?
Certain states have boat insurance requirements. And if you financed your boat with a loan or park it in a slip, your lender or marina will likely require proof of coverage. But even if you bought your boat outright and your state doesn’t require insurance, it’s smart to protect yourself, your passengers and your vessel.
Suppose you’re in an accident, injuring the passengers in another boat. If you’re financially responsible for all repairs and injuries, it can end up costing you a small fortune.
To safeguard against financial ruin, buying boat insurance is always a good idea.
Ashley Kilroy is a personal finance writer and content creator. In addition to being a contributing writer at Forbes, she writes for solo entrepreneurs as well as for Fortune 500 companies.