It’s already been the opener of fishing season for some states, and soon, Memorial Day Weekend will be upon us. While time on the water with friends and family can be lots of fun, it also carries a fair amount of risk –especially when travel is involved, or you’re not the only one on the water. Here’s what independent insurance agents should know about Boat and Watercraft Insurance as people get excited to head out on the lakes.
Types of Watercraft and Primary Use
Agents should start by asking the client about the type of watercraft being insured (e.g., motorboats, sailboats, yachts) and how it will be used (e.g., recreational, fishing, commercial).
Different boats may have different insurance requirements and risks. For example, sailboats may have unique risks, such as capsizing or damage to sails, which can affect insurance rates. Fishing boats often carry expensive equipment and may have higher liability risks, impacting insurance premiums.
Boats and watercraft used for commercial purposes, such as fishing charters or tour boats, may have higher insurance premiums due to increased liability risks and usage.
Required Coverage for Boats and Watercraft
In the United States, the types of boat and watercraft insurance required by state law vary depending on the state and the type of watercraft. Often, the requirement is based on the motor (over a specific horsepower).
Liability insurance is the one typically required. It protects against claims for bodily injury or property damage caused by the insured boat. The minimum coverage limits may vary by state.
Some states require personal watercraft (PWC) insurance for non-boat watercraft like Jet Skis and WaveRunners. This coverage may include liability insurance and additional protections specific to PWCs.
These requirements often apply to boats and personal watercraft used on public waterways. Additionally, some states may require insurance for boats stored or operated on state-owned waterways, regardless of size or motor power.
However, the state isn’t the only entity to consider. Some marinas require liability coverage for boat owners. If the client took out a loan to get the boat or watercraft, their lender may require insurance. They usually require insuring it up to a predetermined amount.
Additional Coverage Options to Offer Clients
Teach clients about optional coverage add-ons that may enhance their protection. Depending on their situation, they may want to add towing and assistance coverage or coverage for accessories or personal effects. Here are some additional options for them to consider:
- Comprehensive Coverage: This type of coverage provides protection from physical damage to the boat from non-collision incidents like theft, sinking, storm damage, fires, and vandalism. According to the National Insurance Crime Bureau (NICB), 4,240 watercraft were stolen in 2019. The top state for thefts was Florida, and the most common type of theft was personal watercraft like Jet Skis.
- Medical Payments Coverage: In case of a boating accident, provides reimbursement for medical expenses incurred by the insured and passengers in the event of a boating accident, regardless of fault. Boating accidents are, unfortunately, common. According to the U.S. Coast Guard, 5,265 accidents were reported in 2020. Those led to 3,191 injuries and 767 deaths. While not required by law, this add-on is a good idea and can help cover medical bills and expenses.
- Uninsured or Underinsured Boater Coverage: This coverage protects the insured boat owner if they are involved in an accident with another boater who doesn’t have insurance or doesn’t have enough insurance to cover the damages. Again, boating accidents are common.
- Accessory or Personal Effects Coverage: This coverage is for additional equipment not fully covered by the comprehensive watercraft policy, such as trailers, navigation equipment, and fishing gear.
- Fuel Spill Liability: Fuel spill liability coverage pays for cleaning up fuel spills caused by the insured boat. While not typically required by law for recreational boaters, it’s important for environmental protection. It may be required by law for commercial vessels.
- Towing and Assistance Coverage: Towing and assistance coverage provides reimbursement for towing and emergency assistance services if the insured boat becomes disabled on the water. This coverage can be valuable in emergencies.
While liability insurance is the primary coverage required by law for most boats and watercraft, boat owners should consider additional coverage options to protect their investments and mitigate financial risks in case of accidents, theft, and other unforeseen incidents.
Navigational Limits
The navigational area where the watercraft operates can affect insurance rates. Boats used in coastal or offshore waters may have higher premiums than those used on inland lakes and rivers due to increased risks associated with navigation in open waters.
Agents and clients should understand the navigational limits of insurance policy. There may be rules on where the boat or watercraft can be used and restrictions on international waters.
Deductibles and Limits
Discuss deductible options and coverage limits with clients to ensure they have appropriate coverage for their needs and budget.
Exclusions
Be sure the client understands the common exclusions in boat insurance policies, such as wear and tear, gradual deterioration, and intentional acts. Other exclusions often include:
- Damage from animals
- Corrosion
- Service and maintenance
- Mold
- Manufacturer’s defects
- Dents
- Damage while on drugs or using alcohol
- Renovations
Damage that occurs while someone not authorized by the policyholder is driving the boat, such as a friend or family member without permission, may also not be covered.
Don’t Forget Discounts
Be aware of potential discounts that clients may qualify for, such as safety equipment discounts, multi-policy discounts, or completion of boater safety courses. Other boat-specific discounts reward having a diesel-powered motor (over gasoline) and installing an onboard fire suppression system.
Final Thoughts
Spending time on the water can be both fun and profitable. However, it’s important to consider potential risks and ensure they’re adequately covered based on their planned use of the boat or watercraft. By having a good understanding of these aspects of Boat and Watercraft Insurance, independent insurance agents can wisely guide their clients to ensure their boats are appropriately covered against liabilities. That way, their clients can set their minds at ease this summer as they enjoy their time on the water.