Your Ultimate Guide to Understanding Boat Insurance

The minute a new boat owner receives their vessel it’s only natural to want to hit the open water to feel the sun on your face and the wind in your hair. However, owning a boat is a major responsibility. Before hitting the open water, there are a few steps that need to be taken care of to ensure you are abiding by the rules. Learn everything there is to know about boat insurance, including if you need it, so that you can get on the water faster.

What is Boat Insurance?

While people have often heard of vehicle insurance, health insurance, and life insurance, boat insurance is a lesser known concept. However, boat insurance works in exactly the same way as most of these other types of insurance. In return for a monthly or yearly premium, an insurance company will help protect your boat from certain risks that may occur on the water.

Whether it’s damage from an accident, vandalism, theft, or problems that occurred due to natural environmental factors, boat insurance can afford a level of financial protection. Considering the fact that the average cost of a used boat alone is between $10,000 and $20,000, boat insurance can help ensure you recoup some of this investment in the event of an accident.

Is Boat Insurance Legally Required?

The majority of states around the country actually don’t require boat insurance as a prerequisite of getting on the water. However, a majority of boat owners have insurance due to two other primary reasons. First, if you are purchasing your boat via financing from a loan, the lender will almost always require you to get insurance on the boat. This is an extra form of security for the lender so that they can get some money back if something happens.

Secondly, a large number of ports and marinas on major waterways will require you to have boat insurance with a minimum amount if you wish to use their facilities. Currently, the only three states that require boat insurance are Arkansas, Utah, and Hawaii, but you will likely need to take on this type of insurance even if you aren’t in those states.

Different Types of Boat Insurance

For those who are considering adding a boat insurance policy to their list of current insurance, there are a number of different options to choose from. As mentioned, boat insurance will not always be required. Those who do require boat insurance will most often request to see evidence of the first two types of insurance outlined below:

Property Coverage

In the event you hit another person’s property with your boat, whether that property be another boat, a dock, a pier, or something else entirely, property coverage insurance will pay for those damages to a certain degree. In the event that property was another person’s boat, there are two types of this insurance that a person will have agreed to at the time of signing which determine the amount paid:

Actual Cash Value

An actual cash value policy means that the insurance company will only pay for the actual cash value of the boat at the point in time in which it was declared a total or partial loss.

Agreed Amount Coverage

An agreed amount coverage policy will pay out a sum of money based on the value of a boat at the time the policy was underwritten.

Liability/Bodily Injury Coverage

Bodily injury liability coverage for boat insurance provides financial compensation to another party involved in an accident if they were injured as a result of the wreck and you were found to be at fault. General liability coverage, often provided with bodily injury coverage, pays for damages to their boat as a result of the accident. It will also sometimes cover legal expenses in the event you are sued by the other party.

Uninsured Watercraft Coverage

Given that boat insurance is not required in the majority of the U.S., uninsured watercraft coverage is incredibly important. This form of insurance offers you financial compensation in the event you are hit by another boater who does not have insurance and who cannot afford the expenses out-of-pocket. In this situation, your uninsured watercraft coverage policy will kick in to cover some of the difference.

Additional Boat Insurance Coverage

There are a variety of other boat insurance types that a boater can consider adding to their existing policy. Comprehensive coverage is a common form which protects against situations such as fire, vandalism, and theft. Fuel spill insurance helps pay if fuel leaks out of your boat into the open waterway, which can be quite expensive. There are additional add-ons to boat insurance which can be considered depending on your needs and day-to-day boat use.

How Much Does Boat Insurance Cost?

Boat insurance rates can vary drastically depending on a number of different factors. For example, the average policy for boat insurance in New Jersey will cost around $527, whereas the average cost in New Mexico will be as low as $344. Generally, states with direct access to a coastline or any large body of water will come with a higher cost for boat insurance. On top of this, some additional factors that can influence this cost include:

- The safety measures that are in place on the vessel
- The age of the boat that is being insured
- The driving record of the captain
- The horsepower and general capability of the boat
- The type of boat you are driving
- The crash record and general history of the boat
- The location of the boat

Stay protected on the water today

Even if boat insurance isn’t legally required by your state and you don’t plan on parking it in a marina that requires insurance, it’s never a bad idea to invest in protection for your purchase. Considering the average price of a new or even used boat, the last thing you want is to have an accident while out on the water that ruins your ship. Avoid this unfortunate situation by ensuring you have adequate insurance to cover all of your bases. 

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Posted - 05/15/2023