Whether you already have a boat or planning to buy one soon, you’ll want to make sure your personal property and legal liability obligations are appropriately protected in case of a boating accident. While insurance coverage might be similar from one company to another, it may not necessarily be true for boat or watercraft insurance. The insurance coverage for watercrafts and boats can be quite different from other types of coverages. To help you better understand what watercraft insurance is, we created a list of things you need to know about it.
The Basics
Let’s start by understanding the two basic watercraft insurance policies: Physical damage and Liability. The physical damage covers anything connected to accidental loss or damage to the boat and its machinery system. It not only includes the coverage of the engine or the hull but also other equipment on board required for the ship to operate.
As for the liability coverage, it covers all the obligations to the third parties. This legal liability can arise from physical injury, loss of life, or damage to someone else’s property. Liability coverage also helps to pay for your legal defense if you are sued for liability that is covered by your boat insurance policy.
Physical Damage – What losses are covered?
Physical damage coverage usually pays for the repairs to your boat as a result of damage caused by various perils. The best policies provide “all risk” coverage, which means that if the cause of loss is not excluded, it will be covered. Typical causes of loss include weather-related perils such as:
- Wind
- Rain
- Hail
- Lightning
- Fire
- Loss or damage caused by theft or vandalism and other perils*
*It will be better if you choose a policy which will continue to cover your boat even when you are transporting it on land by a trailer.
Agreed Value vs. Actual Cash Value
When comparing physical damage coverage, the most important difference that can be whether the coverage is based upon “agreed value” or “actual cash value” (ACV) loss settlement. Agreed value policies usually pay the amount shown on the policy if the boat is considered to be a total loss. Under such a policy, the damage resulting from a partial loss is typically paid for a replacement cost (new for old basis).
An actual cash value policy provides less coverage than an agreed value policy, and typically with a lower cost. An ACV policy provides coverage up to the current market value of the vessel in case of a total loss taking into account depreciation and the condition of the boat at the time of the loss or injury.
While an actual cash value typically costs less but an agreed value policy will secure the amount you can receive for your boat if a total loss occurs.
