Boat Insurance

Types of Boat Insurance Coverages and Policies

Boat and yacht insurance policies and the coverages they provide vary by quite a bit from insurance company to insurance company. While many auto and homeowners policies are so similar as to be almost identical, marine insurance policies reflect a wide range of coverages, depending on the experience of the insurance company in writing marine insurance policies, their desire to write marine insurance, and other factors.

As with most consumer insurance policies, there are two basic types of boat insurance:

Physical Damage Coverage
Covers accidental loss or damage to the boat and its component parts, including the hull, engines, sails, and other equipment.
Liability Coverage, or Protection & Indemnity
Covers your financial obligations resulting from damage to others, including damage to other boats or property, bodily injury, loss of life, and legal expenses if you are sued for a liability that may be covered under your policy.

Physical Damage Boat Insurance

Physical damage coverage generally pays for repairs or replacement of your boat that result from damage or loss by "covered perils." Some yacht insurance policies provide a specified list of "named perils," but the best boat insurance policies provide "all risk" coverage, which means it covers everything that's not specifically excluded by the policy.

Boats may experience physical damage from a wide range of causes that go far beyond collisions with another boat. Collisions with docks are common, as are collisions with underwater reefs or rocks. Boats also experience damage from storms and storm winds, hurricanes, tornadoes, rogue waves, hail, theft, vandalism, and fire, which could arise from the engine compartment or from the galley, or from a careless smoker.

Coverage for parts of the boat that normally experience wear and tear is usually excluded or limited, such as canvas bimini tops and covers, upholstery and carpeting. Yacht insurance policies vary widely in what they include and exclude for wear and tear, so be sure to check the policy carefully before signing.

Personal Property

Physical damage coverage may or may not include coverage for loss or damage to personal possessions that are not considered part of the boat, such as waterskis, fishing tackle, scuba gear, personal effects, etc. Again, check the policy to determine exactly what it covers.

Towing and Assistance

Your boat insurance policy may or may not include coverage for towing, emergency repairs, or delivery of fuel or parts. Even if it does cover these items, there are likely to be limits with respect to location, distance, and other factors. You should be familiar with your policy so that if you run into problems, you know what's covered and what's not.

Liability Boat Insurance

Liability coverage could be more important than physical damage coverage. If you go without physical damage insurance for your boat, the most you stand to lose financially is the value of your entire boat and everything on it. But your liability in case of damage to others — boats, other property, and people — is virtually unlimited and could wipe out your life savings if you don't have the right liability boat insurance.

Your basic liability coverage for physical damage and bodily injury to others should be sufficient to protect your life savings from being depleted. If you own nothing of any value besides your boat, liability coverage is likely to be less important than if you have several millions in cash and property.

In addition to basic liability, you may wish to have coverage for wreck removal and disposal in case your boat is wrecked and is considered a hazard to navigation. Owners of such vessels are required to remove the hazard, and depending on the size of the yacht and the location and situation of the wreck, this could be an expensive undertaking.

Cleanup Insurance

Additionally, if your boat spills oil or other pollutants, you may be liable for cleanup expenses. Again, this could get pricy. Depending on the size of your fuel tanks, holding tanks, and other storage on your boat, you might decide this is an important coverage to have.

Employee and Crew Insurance

Many boat insurance policies offer separate coverage for temporary employees who may work on your boat, such as marine mechanics, boat detailers, and other workers, in case they should be injured while aboard your boat. This insurance is separate and distinct from the coverage for paid crew members as required under the General Maritime Law.

Captain's Insurance

Finally, if you ever use someone else's boat, you'll want to be sure you have "non-owned" boat liability coverage, and if you charter your boat or carry passengers for a fee, you'll want to obtain insurance for those situations. These will usually be separate riders, and you have to seek out specialized marine insurance companies to obtain such coverages.

Uninsured Boater Coverage

Boaters liability insurance is not required by law, and many boaters do not carry liability coverage. Uninsured boater coverage will compensate you for the cost of injuries to persons you your boat who are injured by another, uninsured boater. This coverage also generally applies if you or your guests are injured by a boater who leaves the scene and cannot be identified.

Medical Payment

Medical payment coverage will pay for medical care, ambulance, and other medical costs associated with someone being injured while on board your boat. Some boat insurance policies include medical payment coverage for injuries incurred while someone is boarding your boat or disembarking, while other policies do not include this coverage. Also, some policies cover you and your family, while other policies only cover guests. Be sure to find out the limitations and exclusions of any medical coverage you get with your boat insurance.

Salvage and Wreck Removal

Wreck removal generally pays for the cost of salvaging and removal of your wrecked yacht when the damage is caused by a covered loss, and when when removal is required by law. Additionally, salvage costs may include coverage to salvage your vessel even when removal is not required. If this is important to you, be sure to check whether the policy covers such removal.

Boat Insurance Exclusions

Virtually all boat and yacht insurance policies specifically exclude coverage for damages that result from illegal or fraudulent acts by the named insured, along with damages resulting from war, vessel seizures by the authorities, normal wear and tear, design defects, and certain other types of damages.

With most policies, you'll need either a special policy or an additional rider to have coverage for charter boats, commercial vessels (including commercial fishing), and sightseeing and excursion vessels.