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VOL. 11 NO. 1
Take a class

Comparing coverage

Read your insurance policy thoroughly

Comparing coverage

After shopping for yacht insurance, I thought others might benefit from what I learned.

First off, if your vessel is over 26 feet, you should shop for a yacht policy rather than a boat policy.

Determine which company is actually underwriting the risk and issuing the policy. Most insurance agents represent multiple underwriters and can recommend a policy appropriate for you. Get price quotes and sample policies from at least three different underwriters.

Be aware that standard yacht or boat policies don’t exist. Each policy is different, and underwriters write their own contract language. You cannot ask three companies to quote you a policy with $75,000 agreed hull value and try to compare apples to apples. You must read the entire policy to discover what the insurance covers and what it doesn’t. Look for the following provisions in the fine print.

Named storms. Some policies exclude all claims resulting from any named storm for vessels over 10 years old. Other policies cover the damage or partial loss subject to a higher deductible (most have a 10 percent of agreed hull value). Some policies offer reimbursement of expenses incurred for storm preparation (moving or hauling the vessel).

Consequential damages. Most policies exclude any coverage of components that fail as a result of wear and tear or gradual deterioration. When that seacock or through hull fails, insurance won’t cover replacement. What’s more, if that failed seacock causes your boat to sink at the dock, your insurance may not cover the loss unless your policy includes a consequential damage clause, which costs more.

Marina contracts. Nearly all marinas want you to sign something and provide liability insurance to lease a slip. Be careful: You may be personally liable if your yacht policy doesn’t provide coverage for risks you assume by signing another contract. Also be aware that if underwriters provide liability for marina contracts, the liability could be limited to $10,000 if damage occurs due to a named storm. Although the marina and you may both think you have the $300,000 liability required by the marina contract, you may have just assumed a personal liability for $290,000.

Depreciation. Most of you know that claims for canvas, dinghies and the like will be depreciated, with a “useful life” of around five to seven years. But major electrical or mechanical equipment can be depreciated as much as 85 percent. One policy I examined excluded coverage for mechanical equipment older than 15 years. If you have an older vessel, you may not have the insurance you think you have.

Long story short: Read your policy thoroughly.
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