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Boat Insurance Policy Coverage – How Much Do You Need?

My dad is an avid sailor. Notice I said “avid” and not “good.” In his many sailing adventures, he has – among other disasters – been stuck on a sandbar, mired in an oyster bed, and sprung a leak – having to quickly bail while the coast guard drove out to save him.

Legally, when you own a sailboat, it’s mandatory to have a boat insurance policy, which is good news for my dad. Other boaters, on the other hand, aren’t always tied to the same regulations, but that doesn’t mean you should forego insurance just because you don’t have to have it. Where I live, more people own boats than they do cars, and I’ve seen quite a few boating accidents (and not just in boats driven by my dad). These boating accidents can spell disaster if you don’t have proper insurance. Boat repairs are costly, and if the boat sinks, you may lose your entire investment (not to mention all of the personal property inside).

A boat insurance policy will help protect you against loss, but you may end up throwing your hard earned money into the sea if you choose the wrong policy. Boat insurance policies come with dozens of optional policy add-ons, different payout requirements, and different premium rates that can add up quickly if you’re not careful.

Here, we’ll look at the all moving parts of a boat insurance policy and then discuss how to choose the best options for you.

Boat Insurance Options

Main Components

Boat insurance looks awfully similar to an car insurance policy. The core of the boat insurance policy has three main components:

  1. Bodily Injury Liability – This protects you from being sued or having to pay out of pocket if you hurt another boater during an accident. Your policy will pay the other boater’s medical bills up to a certain limit.
  2. Property Damage Liability – This coverage will pay for damages you cause to other property. Primarily, this includes boats, but will also cover docks, ramps, or other personal property you may damage in an accident.
  3. Physical Damage – This coverage pays for the damages you cause to your boat or trailer. Physical damage will pay for boating accidents both in the water and on land, (like if your trailer knocks down a sign as you’re pulling away from McDonald’s).

You have the option to purchase an additional comprehensive and collision plan beyond the core boat insurance policy. A comprehensive plan will pay for damages to your boat from weather, vandalism, or theft. It will also pay for the cost of replacing your boat if you arrive at the marina and find it stolen. Collision will pay for the cost of repairs or replacement if you are at fault for the accident.

Policy Add-Ons

You have three optional services to choose from when purchasing boat insurance. While some – such as uninsured boater – prove invaluable, others really depend on your own personal preferences. Keep in mind that every policy add-on will increase your monthly insurance premium.

  1. Uninsured Boater Bodily Injury – If you get hit by an uninsured boater, this policy add-on will cover the cost of your medical bills, lost wages, and pain and suffering. You can also use this policy to cover any gap between an insured boater’s liability limits and your own personal damages.
  2. Personal Effects Replacement – This add-on will pay to replace any personal belongings you lost during a boating accident. This includes things like cell phones, clothing, and cameras. It does not include personal watercrafts. You will have to pay a deductible to file a claim against personal effects replacement.
  3. On-Water Towing and Labor – If you have ever broken down in the middle of a lake, you know the expense of a good towing service. With this add-on, you’re covered in the event of a break down.

Insurance Freebies

Several insurance companies include additional services or policy add-ons at no charge. For example, as of 2011, Progressive includes pet insurance with a comprehensive boat insurance policy. Pet insurance will cover the cost of your pet’s vet bills in the event of an accident. Companies also offer discounts to customers who buy one or more types of insurance. When shopping for boat insurance, consider any add-on or discount you can get from the company.

Paying Out

When you purchase boat insurance, you will choose from three options for how the insurance company will pay you in the event of an accident claim.

  1. Actual cash value will pay you the current market value for your boat or personal belongings. Since everything depreciates, what you get will usually fall below what you actually paid.
  2. Agreed value pays you an amount you agree on when you sign up for the policy.
  3. Full replacement cost pays for actual cost of replacing your boat. Full replacement cost will have the highest premium, but will keep you from any financial liability.

Deciding What You Need

Now that we’ve discussed the different options for boat insurance, here are four steps you can take to choose the best one for you.

  1. First, you will need to choose a limit for your bodily injury, property damage, and physical damage coverage. Choosing a lower limit will bring your monthly premium down, but if you go too low, you may have to pay out-of-pocket for damages. Choose a limit somewhere in the middle. You want enough coverage to avoid being sued, but you do not want to purchase so much coverage that you end up paying for something you’ll never use.
  2. Next, you’ll need to decide on whether or not to purchase comprehensive coverage. If you have a loan on your boat, or own a newer model, comprehensive coverage is a good idea. If you own an older, paid-off boat, you may not need the additional coverage. Keep in mind that you cannot have certain policy add-ons without comprehensive coverage.
  3. From there you will need to pick your policy add-ons. Choose the add-ons that will benefit you the most. For example, if you primarily use the boat for fishing in a small lake, you may not need on-water towing service. But if you frequently travel far out into the water, you’ll be glad to have the policy one day.
  4. Finally, decide on a payout method. Keep in mind that choosing full replacement cost will have the highest premium, but will pay the most in an accident. Actual cost will have the lowest premium, but pay the lowest in the accident. Generally, if you cannot afford to repair or replace your boat, purchasing replacement cost is a good idea. Otherwise, choose actual cash value or agreed value.

Final Word

Boat insurance may seem like an unnecessary expense, especially if you’ve never had a problem with your boat before. But much like auto insurance, you never appreciate it until you actually need it. And when you’re stuck out on a sandbar one day, you’ll be glad you have it.

Do you have boat insurance? What components and add-ons of your policy have proved to be most valuable?

Angela Colley is a freelance writer living in New Orleans, Louisiana with a background in mortgage and real estate. Her interests include animal rights advocacy, green living, mob movies and finding the best deal on everything. She blames her extreme passion for never paying full price on two parents that taught her that a penny saved is two pennies if invested wisely.

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