Boating is a valued pastime for many, but like any other activity, it comes with various responsibilities and risks. That's why boat insurance is an essential part of owning a watercraft. It’s a form of protection for yourself, your passengers, and your boat. 

This guide will take a closer look at different types of boat insurance coverage and what they provide.

Do You Need Boat Insurance? 

In most cases, boat insurance is is not legally required but it is strongly recommended. Boat insurance can provide financial protection in case of accidents, damage, or theft of your watercraft. It can even provide coverage for medical expenses for your guests and liability for injuries or property damage caused by your boat. Without insurance, you could be held financially responsible for each of these items. 

If you financed your boat, the lender may require insurance as a condition of the loan. This is because the boat is considered collateral for the loan, and the lender wants to protect their investment in the event of an accident or other incident that damages the boat.

The lender will typically require that you have a specific type and amount of insurance coverage. They may also require that the insurance policy includes certain endorsements or riders. This ensures that the lender will be notified if the insurance policy is canceled or if there is a change in coverage.

It's always a good idea to speak with a boat insurance expert to understand your options and find the best coverage for you.

What Does Boat Insurance Cover? 

Boat insurance typically covers a wide range of risks and perils, including the following:

• Collisions: Coverage for damages to your boat caused by a collision. This can include coverage for repairs or replacement of the boat, as well as any permanently attached equipment that is damaged in the accident.
• Natural Disasters: Coverage for damages caused by named storms, hurricanes, floods, and other natural disasters. This can include coverage for damage to the boat's hull and internal systems, as well as any permanently attached equipment that is damaged in the storm.
• Fire: Coverage for damages caused by fire or explosion. 
• Theft: Coverage for the loss of your boat or equipment due to theft. 
• Liability: Coverage for damages or injuries that you cause to other boats or individuals. This can also include coverage for legal defense in the event that you are sued.
• Medical Payments: Coverage for medical expenses for your guests in the event of an accident.
• Personal Property & Equipment: Coverage for personal items and accessories on your boat, such as fishing equipment, navigation equipment, and electronics. 
• Towing and Roadside Assistance: Coverage for the cost of towing your boat in case of breakdown or accident.

Agreed Value Versus Actual Cash Value 

Agreed Value (AV) and Actual Cash Value (ACV) are two different ways in which the value of an insured item, like a boat, is determined.

Agreed Value Boat Insurance Policy 

An Agreed Value Policy is a type of boat insurance where the policyholder and the insurance company agree on a specific value for the boat when the policy is purchased. In the event of a covered total loss, the insurance company pays the agreed value (regardless of the boat’s actual cash value at the time of loss). 

Some of the benefits of an Agreed Value Boat Insurance Policy include the following:

• The policyholder is guaranteed a specific payout, rather than the depreciated value, in the event of a covered total loss 
• The policyholder will have peace of mind knowing that their boat and insured items are covered for their total value.
• There is no need to prove the boat's value at the time of the loss.

It's important to note that Agreed Value policies tend to have higher premiums than Actual Cash Value policies. They may also be less flexible in terms of coverage.  

Actual Cash Value Boat Insurance Policy  

An Actual Cash Value Policy is a type of boat insurance where the boat's value is determined based on the original cost, minus depreciation, to arrive at its current value. In the event of a covered total loss, the insurance company pays the amount that it would cost to replace the boat with a new one of the same make, model, and age minus depreciation.

Some of the benefits of an Actual Cash Value Boat Insurance Policy include the following:

• More affordable than Agreed Value policies
• Greater flexibility in terms of coverage

However, with Actual Cash Value policies, policyholders are not guaranteed a specific payout in the event of a total loss, but rather the depreciated value of the boat. This could be less than what the policyholder paid for the boat.

Other Things to Know About Your Policy  

It's important to regularly review your policy or speak with your insurance agent to understand the coverage you have and any limits or exclusions that may apply.

Below are some important things to know about your policy:

Navigational Limits

Your policy may have limit coverage to navigating within specific geographic boundaries. These limits are typically defined in the policy and may include specific bodies of water, such as a lake or river, or a specific area, such as the coastal waters of a particular state or country. If the policyholder ventures outside of these limits, the policy may not cover any damage or losses that occur. 

Navigational limits vary from policy to policy and from insurer to insurer. Some policies may have no navigational limits, while others may have very specific limits. It's important to select a policy that includes coverage for where you plan to use your boat. 

Layup Periods  

Taking your boat out of the water is common during cold weather. Many boat insurance policies offer a winter layup discount if your boat is not in use and in storage. This can help save you money on your premium.  

However, if you take the boat for a spin before the layup period ends, you won’t be covered for any damages or losses that occur.  

Marine Surveys 

Marine surveys are often required by insurance companies before issuing a policy for a boat, especially larger, older models. The survey assesses the condition and value of the boat by thoroughly examining the hull, decks, machinery, electrical systems, and safety equipment. This helps to verify that the boat is in good condition and not in need of major repairs. 

The surveyor will also take into account the boat's age, usage, and intended use and will provide a written report outlining the boat's condition and any issues that need to be addressed.