Advice and tips for boaters on looking for insurance

July 2017

By Chad Richardson

The dream boat you’ve sought since your first big job is at its slip. You’ve been diligent at mainte­nance and you’ve babied it. Memories are made on board every weekend (and some weeknights). But as you watch the radar and see the big mutli-col­ored thunderstorm blobs move across the screen from west to east, you can’t help but get nervous. That isn’t the time to be wondering if you have the right insurance on that dream boat.

For this issue, we’ve asked an expert in boating insurance to share his tips and advice on what to look for and what to avoid when it comes to your policy.

Kevin Gruys of Aircraft and Marine Insurance was kind enough to do a Question-and-Answer session with us. Here goes:

Q: How does boat insurance differ from auto or home?

A: If your question is whether or not a boat be­longs on an endorsement to a Homeowners policy, or, if it belongs on a Boat policy; the answer is simply this: If the boat will ever leave your garage you need a boat policy. Any time a boat is endorsed onto a homeowners policy, the coverage is usually strictly physical damage coverage and on an acv basis. In other words, you would be lacking the accidental fuel spill coverage, the medical payment coverage, the personal property coverage and the big coverages such as wreck removal and salvage and mechanical breakdown. So, I recommend you purchase a boat policy, or a yacht policy.

By the way, there are lots of ways boat insurance differs from home and auto insurance. The primary ways are that boat policies contain warranties. Warranties are agreements contained in the boat policy (or yacht policy), and if an insured should break ( or breach) one of these warranties, then coverage provided by the policy would become void. For example, there is a private pleasure use warranty. There is a navigation area warranty. There may be a winter lay-up period warranty. And, the companies you should avoid using typical­ly contain a warranty your boat will be maintained in seaworthy condition. Essentially, if the company determines your boat was not in seaworthy con­dition at the time of loss, their policy will not pay. I recommend you purchase a boat policy that does not have that warranty. There are several boat insurance companies policies that do contain that warranty.

Q: What questions should a boater ask when shopping for marine insurance?

A: They should ask their agent if the agent is comfortable and knowledgeable with boat insur­ance. They should ask the agent which insurance company has the best reputation for paying claims fairly and promptly. They should ask which com­pany provides all the key special coverage such as Wreck Removal Coverage and Salvage Coverage and Mechanical Breakdown Coverage. Typically no one asks how the loss settlement clause reads of a particular boat insurance policy. I know this can have a significant impact on how much money a company will pay for a particular claim. For example; If there were to be damage to a boats outdrive unit; will the company be paying based on the cost of an OEM outdrive, or, a remanufactured outdrive unit (from the original manufacturer), or, will it be based on the cost of a copy of an OEM outdrive that was made in China. Trust me, there are big differences in price and this will make a big difference in the dollar amount your insurance policy will pay you. Generally speaking, at least make sure you are buying an “Agreed Value” policy, and make sure you are buying a policy with Salvage Coverage, Wreck Removal Coverage and Mechanical Breakdown Coverage.

Q: What’s the difference between Boat and Yacht Insurance?

A: Generally the difference is found in the liability section of the policy. The small boat policy will have watercraft liability; which is providing coverage for the physical damage or the bodily injury you may become legally responsible for, arising out of the use and operation of your boat. But, Aircraft-Marine Insurance both Boat and Yacht policies should have wreck removal and accidental fuel spill coverage.

A yacht policy generally adds coverage for US longshoreman and Harbor workers Act coverage and may also have coverage for a paid captain and paid crew. This is called Jones Act coverage, and this is insurance that is needed if you hire someone to captain your yacht or essentially be a paid employee on your yacht. It is much like workers compensation coverage. But, it is actually more broad and is a subject in itself. If you are paying someone to work on your boat and they sustain an injury while in the course of their duties aboard your boat, watch out. Big money. Medical payments, lost wages, pain and suffering; it can become extremely expensive.

Q: What common mistakes do you see when boaters buy coverage?

A: The most common mistake is when a boat own­er will go online and purchase boat insurance like it is a commodity. Trust me, it is not a commodity. There are huge and substantial differences in cov­erage from one company’s policy to another com­pany’s policy and you will never learn that when you shop for boat insurance on line. My experience is most people who shop for boat insurance on
line end up with an actual cash value policy and they rarely understand what that means. And, ironically, you could probably find better coverage at a better price through a knowledgeable boat insurance agent.

Q: What pitfalls should boater’s be aware of when shopping for coverage?

A: Don’t make the mistake of thinking boat insur­ance is boat insurance. As I mentioned earlier, the biggest mistake would be thinking boat insurance is a commodity.  Broccoli may be a commodity, but boat insurance policies certainly are not. And every company online is dumping your informa­tion into a comparative rating tool and telling you where the lowest price is. But, that does not mean the lowest price is the policy you should purchase.

For example, if you purchased a nice new boat with twin 250 horsepower outboard engines and you then went for a ride on the lake and the engines ingested debris and ruined the engines, you would discover most boat policies do not pay for mechanical damage to the engines. However, some do. What would not having a policy that provided mechanical breakdown coverage mean in this example. The answer is one company’s policy pays zero. But another company’s policy would pay for the cost of new engines. Maybe $30,000 each. Maybe $60,000 in total. I consider $60,000 to be a very significant difference. And, I view my job as making the customer aware of this very important information when they decide which boat insurance policy to purchase.

Q: What should a boater with coverage look for in an existing policy to make sure their coverage is adequate?

A: Everything already mentioned. Confirm if you have an agreed value policy. Confirm if the insured value is correct. Confirm if the navigation area is correctly addressed. Also confirm if you have all the critical coverage’s including wreck removal and salvage and mechanical breakdown. Did you correctly identify if you have any business use? Do you have a paid person working on your boat?. … and, is the LIMIT of LIABILITY coverage (or, Protection and Indemnity Coverage) adequate to protect all the rest of your assets including prop­erties, savings and investments and don’t forget to protect your future earnings because having your earnings and wages attached can be a dreadful reality. Also, review if you have an Umbrella policy. And if you do, check what the underlying coverage limit requirement is. The list is a pretty lengthy list. You really need to concentrate on just one thing. Get a knowledgeable marine insurance agent. One thing is for certain, it’s not about mak­ing sure you’ve received a “paid in full discount” or whatever the discount Du Jour is. It is, however, about purchasing the coverage’s that will protect your boat as well as all the other assets you have.

Contact: Kevin Gruys can be reached by phone at 952-890-1124 or by email: gruys@aircraft-ma­