The Basics of Marine Insurance
By Tim Akpinar
Unlike auto insurance, marine insurance is not mandatory. However, many yacht clubs will request proof of
insurance before issuing a mooring or slip. Since boat owners can be liable for anything from damage from
their wake, or a sprained ankle of a guest, to the clean-up cost of a fuel spill, insurance is virtually a
necessity for peace of mind on the water.
For insurance purposes, vessels fall into three classes. The first are personal watercraft and are less than
16 feet long. These include jet skis, waverunners, and similar craft. The next class of vessels is boats, which
are 16 feet to 25 feet 11 inches in length. This includes small sailboats and powerboats. Vessels 26 feet or
longer are designated as yachts.
Insurance carriers regard these classes of vessels differently, according to their value and risk. Some
carriers will not insure personal watercraft at all because of the risk. Some will offer coverage for small boats
up to a certain length under a household policy, eliminating the need for a separate marine policy altogether.
Whether you are purchasing insurance for a 24’ sloop or an 80’ luxury yacht, there are elements of marine
insurance common to both vessels. With an understanding of these concepts and the guidance of a good
agent, you can make an intelligent decision as to the best coverage for your needs.
Physical Damage and Liability
A standard marine policy has two basic components. The first is physical damage. The second component
is liability. Physical damage is akin to the collision and comprehensive sections of your auto policy. It covers
against loss or damage to the vessel, engine, sails, and attached equipment. Losses may stem from theft,
fire, sinking, collision, grounding, or other listed risks. Physical damage can be based upon replacement
value of the vessel. It can also be based upon agreed value, which is exactly what its name says it is, an
exact dollar figure written in the policy. Keep in mind that you will pay more for an agreed value policy.
The liability component covers against third party claims (claims of someone else) for personal injury, loss
of life, damage to property. It is comparable to the liability section of your auto policy. If you are involved in a
boating accident that injures another person, or causes physical damage to another boat, you can be held
liable. If your wake causes damage to a marina dock, you can be held liable. These are the types of claims
against which liability coverage offers protection. Common policy limits range from $100,000 - $300,000 and
$250,000 - $500,000, but you can consult your broker for coverage limits that best suit your personal
Physical damage and liability are only basic components of a policy. A good policy will offer more. Most
policies offer a medical payment provision to pay medical bills for injuries sustained by the insured and her
guests while on the boat.
Personal effects coverage will pay for the loss of personal items like sports gear, fishing gear, clothing, etc.
For obvious reasons, loss of money or jewelry is generally excluded from this coverage.
Uninsured boater coverage provides protection against losses stemming from encounters with vessels that
either do not have insurance or that have fled the scene of an accident.
Boat owners are responsible for removal of their boat if it sinks and becomes a hazard to navigation. Wreck
removal coverage addresses this contingency. Boat owners are responsible for the costs of a fuel spill
clean up. Oil spill coverage addresses this contingency. Towing and assistance coverage pay for towing or
rescue from soft groundings.
There are factors within our control for saving money on marine insurance. Enrollment in a boating safety
course and a good driving record can reduce liability premiums. Installing safety equipment such as
sensors, alarm systems, etc. will reduce premiums. A higher deductible will reduce premiums, but will
mean paying the first few thousand dollars of a loss out of your own pocket. As mentioned earlier, a
replacement value policy will save you money over an agreed value policy. Designating a reasonable and
realistic geographic scope within which you plan to use the boat can also save you money.
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