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Understanding boat insurance

2020 August 1

Navigate the complicated waters of insuring your boat amidst hurricanes, fire and other damage

An umbrella liability policy covers much higher limits and protects your assets from unforeseen events, such as a tragic accident in which you are held responsible for damages or bodily injury.

Wisconsin sailor Carrie Kulas uses her boat mostly on weekends. Her boat is insured by American Family Insurance (AmFam), which also provides coverage for her home and auto. “We had a small incident before we even filled out our new boat info with them and they paid without any issues,” said Kulas.

Sprigg noted the most popular claim among boat owners is hitting a submerged object. “Those are mostly powerboats, but sailboats get hit by lightning or are involved in collisions,” she said.

The majority of boat insurance claims are for partial losses. 

Surveys not always required

Whether the insurance company requires a boat survey should also be taken into consideration. A survey will likely cost hundreds of dollars and may determine the boat is in excellent shape. But it might also discover items in need of repair or replacement. Those upgrades could translate to unanticipated expenses before the insurance company issues the policy.

David Martinez, one of many sailors asked about their insurance needs, said he researched various policies while boat shopping. He learned that surveys are not always a must.  

“My regular insurance company, GEICO, told me that whether a survey is or isn’t required depends mostly on the age of the boat, and that if I buy a newer boat a survey would probably not be required. They also inquired about my sailing experience and any certifications, as that affects the quote,” he said.

Julie Schumann’s insurance company required a survey in order to renew the policy on her 1984 Newport MIII. Comparatively, Jennifer Swart said Progressive Insurance continues to write a policy for her aging Ericson 35 without requiring a survey, but the agreement restricts her sailing to bay and coast. 

“Age, size, and hull material are the primary determining factors on whether a survey is going to be required,” said Pellerin. “Some insurers will also throw value into the mix, or in cases where there is a value question or discrepancy between the owner and the insurer. The market value of a boat could indicate one thing, but if the owner has made substantial modifications or upgrades to increase the value of the boat, that could be justified with a current survey. Insurers will also ask for a survey if they are aware that the boat had prior damage to determine that it is now sound and seaworthy and has been repaired properly.”

In some instances, boat owners are allowed to conduct a self-survey. 

“Certain companies use self-surveys to help the client, who then doesn’t have to pay for a survey every couple of years,” said Sprigg, explaining that a self-survey entails filling out lots of forms, providing essential documentation, and taking photographs of just about every system on the boat. 

“It used to be if you had a sailboat that’s 10 years old, you needed a survey, but that isn’t the case anymore,” she said.

Towing coverage and salvage claims

Misconceptions abound during discussions about towing provisions and salvage rights. Salvage rights and towing provisions are markedly different. “If you run hard aground, your towing provision isn’t going to pay for (the cost of removal),” said Sprigg. “The towing company can claim up to 30% of the value of the boat.” Salvage coverage remains an option for boat owners.

Sprigg related the story of a sailor whose 36-foot boat was struck by lightning and lost power near Titusville, Florida. The boat ran around in a restricted turtle-nesting area. “He had to be airlifted out due to the rules of the area. Then the weather came up and buried the keel.” 

The salvage operation entailed cutting off the keel and the mast, work that was far greater in scope than anything covered by the sailor’s towing coverage.

Certifications reduce premiums

Most insurance companies offer a discount on premiums to sailors who have completed a certified safe boating course. 

“Every company gives credit for courses,” Sprigg said. “If you’re not an experienced boater, taking classes is important for your own safety, not just for your insurance coverage.”

Building a sailing resume can be helpful because it compiles the boat owner’s experience in a single document. “Insurance companies don’t want you to jump from a 20-foot to a 40-foot boat,” Sprigg said.

When your coverage is dropped

Gregory Mulvany has been cruising full time for nearly seven years aboard his 1998 Pacific Seacraft 37. 

“Before we left we had State Farm insurance and they were great, even with repairs associated with Hurricane Katrina. While cruising, we had our policy with Novamar. Yes, the rates have increased year after year, but not exorbitantly,” he said. “We were notified last November that we would not be covered after the current term and could not renew our insurance with Novamar. When questioned as to why they would no longer cover us, their response was that they cannot afford to send adjusters to the Caribbean to evaluate damage to boats and address claims that may come up there.”

Mulvany noted the company refused to provide coverage even though his boat was going to be kept in a hurricane hole at Rio Dulce in Guatemala during the hurricane season. “They would cover us in the New Orleans area, which is a magnet for hurricanes. I don’t understand. This makes no sense to me,” he said.

Pellerin confirmed this trend among yacht insurers. 

“There have certainly been changes in the marine markets over the past years, especially for the larger yachts that spend time in the Caribbean and far reaches,” he said.

Pellerin said the increase in dropped policies following a claim or due to liveaboard status may be a reflection of whether the company intends to stay in the business. “This typically occurs at the time of the renewal of the policy or, more appropriately, non-renewal. The customer is notified that they will need to seek a new insurance provider. This may occur while the yacht is out cruising, depending upon the policy cycle and effective dates. This has been most prevalent with the London Companies who have been predominant players in the yacht market,” he explained.

As for liveaboards, Pellerin said insurance companies have differing underwriting guidelines that do change periodically. 

“They may be OK with liveaboards for a period and then determine that they no longer have an appetite for that type of risk, which is usually driven by the loss experiences that they are having,” he said.

Bluewater sailor Karen Smith examined more than 15 policies before deciding on coverage. “Most of those we looked at didn’t have liveaboard penalties, but they wouldn’t insure ocean passages over 250 miles from shore with only two people on board,” she said. “We ultimately went with a Jackline policy from IMIS/Gowrie group as it best suited our needs. We have lived aboard our Amel Super Maramu for over four years and have, in the past five years sailed over 24,000 miles.”

Bill Russell, owner of the Kelly-Peterson 44 Island Bound, said, “I’ve been cruising slowly around the world for a decade now. My original insurance company had a policy they wanted to sell me that didn’t allow navigation after dark. I thought stopping on a Pacific crossing might be tough,” he said, chuckling “I changed companies and kept them until Fiji. Some boats, not me, were hit by lightning. A boat with my company got a real run-around and no money. Another boat insured by a different company was paid immediately. I changed to them when my renewal was due.”

Russell’s policy has a $10,000 deductible. “So I’m really only covered for a major problem. It works for me. I’d rather repair myself than do all the paperwork for small stuff,” he said.

Determining boat insurance rates

Insurance companies employ sophisticated rating models to determine premiums. According to Pellerin, models are usually based on attributes of the owner: age, experience, risk score, boating safety classes. The models also use the boat’s attributes: size, age, value, power type, hull type, geography and how the vessel is stored.  Most companies prefer the boat be kept at a dock rather than on a mooring.

“As is with all insurance, it’s a collective approach to the group’s risk,” he said. “However, the particular attributes of the individual owner and the boat, along with the associated claim frequency and severity of those characteristics, will drive the rate. If this were not the case, you would see the exact same rate for a boat on the coast in South Florida that you would see on one of the Great Lakes in Michigan, which is definitely not the case.”

Sailors like John Willms, a Canadian currently living in Honduras, are attempting to create non-profit insurance cooperatives as an alternative method of coverage. “I’m working with a not-for-profit sailing school right now to bring this into being,” Willms said.

Weighing the cost of insurance 

The insurance game can get complicated for long-term cruisers like novelist and full-time sailing writer Christine Kling, who with her husband is currently having a steel-hulled boat built in Antalya, Turkey.

“When I was singlehanding on my little 33-foot sailboat, I originally had insurance for three years, but then I was dropped after Florida was hit with several hurricanes. I’ve never had an insurance claim,” she said.

Kling recently queried an insurance company about obtaining coverage for her new boat. “I have been trying for six months and getting turned down everywhere. It will be flagged Canadian and we couldn’t find a Canadian company to insure us if we weren’t going to be cruising in Canada and didn’t have a home in Canada,” she said, adding that EU insurers aren’t fond of North American boats because of how litigious things are there. 

“We were told to reflag with a flag of convenience because no EU insurer wants to go to a North American court where people ask for millions for injuries or damages. Finally, we were offered a Jackline policy through our membership in the Seven Seas Cruising Association.”

Kling, who holds a 100-ton U.S. Coast Guard license, said the policy application required submitting a cruising resume and listing all the passages she and her husband have made among other data.

The insurer wanted annual premiums amounting to thousands of dollars despite the five-digit deductible. “We have no mortgage on the boat, so we’re free to go without hull insurance if we want. We’ve decided it’s just too much money for us. A part of choosing to be a cruiser is that you have a high tolerance for risk. We’re asking if they’ll just give us the Protection and Indemnity coverage, which is basically yacht liability. Most boats have to have liability or they can’t go into marinas or get hauled out. We’re going to go without hull insurance once again and put that money aside each year to cover our own issues such as repairs or lightning strikes. Our boat has an enormous anchor, windlass and chain, and sea chests instead of through-hulls. And she’s built like a tank. We put our money there.”

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