Boat Insurance: What Coverage is Needed to Insure Your Boat
Boat insurance may be one of the least well-understood types of insurance, even among boat owners.
It may be common to assume that boat insurance is much like car insurance, but that’s only partially true.
Many of the provisions are similar, but boat insurance requires many more provisions, due to the unique operating environment boats are used in.
If you’re going to buy a boat, you’ll need to look closely at getting boat insurance, even if it isn’t required by state law.
Liability can be substantial, and property damage can result in the loss of your boat forever.
Good boat insurance can address both problems.
Below is our guide on how to buy boat insurance, including the specific coverage provisions you need to investigate.
Read the Fine Print
This is an important rule when it comes to insurance policies of any type, especially with boat insurance.
An insurance policy is first and foremost, a contract between you and the insurance provider.
Like all contracts, the insurance company is only required to provide compensation for liability and damages specifically included in the policy.
Put another way:
If the hazard is not included in a boat insurance policy, it won’t be covered. You’ll need to know specifically what those coverage provisions are.
Similarly, all insurance policies include certain exclusions. These will be specifically detailed in the policy, and you’ll need to know exactly what they are. If an item is specifically excluded, it will not be covered, and you’ll need to have other provisions in place.
In point of fact:
No insurance policy covers all potential hazards.
For this reason, you’ll need to go through your boat insurance policy very carefully.
Understand any provisions it includes or excludes and be prepared to ask questions about anything that confuses you. If you feel you need a certain hazard covered, you’ll need to discuss that with the agent upfront.
Coverage provisions easily added at the time of application are often very difficult to include after-the-fact.
Below are the more common hazards and coverage types you’ll need to have in a good boat insurance policy.
1. Bodily injury & property damage liability (BI/PD)
Specific coverage for boats is divided by the size of the vessel.
A small vessel is considered one that is 29 feet or less in length, and a large one is greater than 29 feet.
The size of your vessel will impact the amount of BI/PD coverage you will need.
For example, on a smaller boat, standard coverage includes the following:
- Medical payments, $5,000.
- Uninsured boater’s liability, $300,000 - $500,000 (be aware that about 50% of US boat owners do not have boat insurance!).
- Personal effects, $1,000 after a $250 deductible.
- Fishing equipment, $1,000, after $250 deductible.
If your vessel is larger than 29 feet, common coverage levels are as follows:
- Medical payments, $10,000.
- Uninsured boater’s liability, $500,000, with no deductible.
- Personal effects, $5,000 with a $250 deductible.
- Fishing equipment, $1,000, with a $250 deductible.
In general, BI/PD will cover either bodily injury you might cause to someone while you are using your boat (including your passengers), or damage you might cause to someone else’s vessel, or even a dock or other structures. This is very similar to the liability portion of an auto insurance policy.
For personal liability coverage, most boat insurance companies recommend a minimum $1 million in liability coverage.
More will be recommended if you have a higher-end vessel or a high-performance boat.
2. Comprehensive & collision
Just as is the case with auto insurance, collision covers damage from accidents that occur while your boat is moving.
This can include hitting another boat, crashing into the dock, or colliding with the submerged object. The coverage even extends to injuries to passengers traveling on your boat.
Comprehensive, on the other hand, covers hazards considered to be out of your control.
That can include:
- theft of the boat itself or any of its components
- high winds
- other weather-related damage
3. Total loss replacement
This provision will have limited applicability. It’s usually limited to those who are the original owner of the boat, and it must be no more than one model year old.
Coverage typically extends only to the first model years during which you’ll either get a new boat or you’ll be given the amount you originally paid for the vessel.
Different insurance companies have their own variations on this coverage.
For example, some may not pay a claim if your boat is more than five years old. Others may pay based on depreciated value, while still others may extend the coverage beyond the five-year limit.
Once again, pay close attention to the fine print!
4. Consequential damage
If you’ve never had a boat insurance policy in the past, this one may seem unusual.
With an auto insurance policy, coverage for damage to your vehicle is typically limited to any sustained in a moving accident or while your vehicle is parked.
But boat insurance policies come with a consequential damages provision.
Rather than restricting coverage to damage sustained while operating or sitting in port, it instead covers losses that are the result of wear and tear to your vessel.
This can include rot, mold, and corrosion.
These are common hazards associated with having a vessel operating in a marine environment on a regular basis.
Just as is the case with most other types of insurance policies, boat insurance comes with deductibles.
The higher the deductible, the lower your premium will be.
This will help you to lower the cost of your boat insurance policy, but you’ll need to be sure you have the funds available to cover the deductible in the event of a claim.
5. Fuel-spill liability
This is another potential hazard that departs from auto insurance policies.
But since a boat lives in the water, the potential for spilling fuel is real.
It can happen due to something as simple as a mishap at a fueling station, a leaking fuel tank, or something more dramatic, like an at-sea collision or even a complete sinking of the boat.
You’ll need a policy provision that not only covers the cost of the fuel clean-up, but also any fines that may be charged by the local authorities looking to protect local marine life.
6. On-water service and towing
Just like it’s highly desirable to have service and towing coverage with your car insurance, it’s equally – or even more important – to have with boat insurance.
Should your boat become disabled away from port, you could be in a life-threatening situation and even face the possibility of sinking.
Just as is the case with an auto insurance policy, a boat insurance policy can provide towing back to your home port.
Without coverage, this can be an expensive charge, running up to $400 per hour of towing.
Boat insurance also has the equivalent of roadside assistance.
Should your vehicle become disabled while you are towing your boat, this provision will cover the additional cost of towing your vehicle and your boat to the nearest repair shop.
7. Salvage coverage
The unfortunate reality is that a boat can sink.
If so, the cost to recover it could be covered under salvage coverage, or wreckage removal provision.
The sinking of the boat does not always require salvage, however.
This most likely will happen either in port, or in a narrow harbor channel, where your sunken vessel could represent a hazard to other boats passing the area.
This policy provision will cover the cost of salvaging your vessel to help you avoid fines.
This is another area where it’s important to check the fine print. It’s entirely possible salvage coverage will not be offered if your boat sinks either in an area where removal is not legally required or even below a certain water depth.
8. Trailer coverage
If you own a boat, you’ll most likely need a trailer to transport it on land. If so, you’ll need coverage for the trailer as well.
In most cases, the trailer will not be covered under your boat insurance policy.
Though it may be covered as an extension of your auto insurance, it’s most likely to require a separate policy. (A separate policy is strongly encouraged because of the unique nature and service a trailer provides.)
And while a boat trailer can certainly be damaged in an accident, either while en route to the marina or while towing your boat, typically the biggest hazard is theft.
There’s generally no state requirements to insure a trailer since it’s not a motorized vehicle. But you may decide to get coverage if the trailer is either late-model, high cost, or highly specialized.
A second-hand trailer that has little value may not make financial sense to maintain coverage for.
9. Cruising extension
This is an optional coverage provision that allows you to get additional coverage if you plan on sailing your boat outside the US.
Most typically, that will involve sailing to local international destinations, like Mexico or the Bahamas.
It will provide the above coverages while your boat is operating outside US waters.
10. Storm plan
This isn’t a boat insurance coverage option, but rather a requirement your boat insurance company may make if your boat is located in an area prone to hurricanes.
To comply with the requirement, you may be required to have a plan in place to store your boat in a hurricane-proof facility or towed to a safe harbor. The idea is to protect your boat during the most hostile weather and sea conditions.
If you have a plan in place, it can result in lower premiums. However, if you have a plan in place and fail to execute it during a storm, the insurance company may fail to pay the claim or pay only a limited amount of the damage.
Be sure to investigate if the boat insurance company has such a requirement.
The Risk of a Liability-Only Policy
Unlike auto insurance, where it’s not unusual to have liability coverage only – and exclude collision and comprehensive – it can be a costly practice if you own a boat.
You’ll certainly want to have liability coverage, even though it isn’t required by state law. But you’ll need to carefully evaluate the various provisions that apply to property damage.
Even as a seasoned boat operator, you’ll be operating in either unfamiliar waters or weather conditions.
The behavior of other boaters can also be unpredictable, as can a sudden collision with a heavy object floating just below the surface of the water.
This is where it’s important to remember that a hazard is only covered under your boat insurance policy if it is specifically listed. You should make sure your policy will protect against as many hazards as you can anticipate.
A liability-only policy may protect you from personal financial loss due to a collision with another vessel, but it won’t pay if your boat is destroyed in an at-fault for no-fault collision.
As you can see, the many provisions of a boat insurance policy are very similar to what they are for an auto insurance policy.
You’ll need to make sure you understand the various provisions, which apply to you, and which you’ll need to include in your policy.
As to the cost of boat insurance premiums, they’re generally much lower than auto insurance premiums.
Depending on what state you live in, the size of your vessel, how frequently you use it, and how you use it, premiums should generally be no more than a few hundred dollars per year.
Though there are generally no state requirements to maintain boat insurance, the marina where you store your vessel may have a requirement in order for you to dock at their facility.
Additionally, a lender may require insurance if you have a loan on your vessel.
When shopping for boat insurance, make sure you work with companies that specialize in the field.
Many of the same companies that offer auto insurance policies also provide boat insurance. But never automatically assume you should get your boat insurance with the same company that holds your auto policy.
Though they may offer an attractive bundling discount, they may not have the right type of coverage for your boat. It is, after all, a highly specialized type of coverage.