Boat Insurance Basics - Helping You Understand How Insurance Works


Understanding all types of insurance, in general, can be quite confusing.

But, having a working knowledge of your coverage, what you are and are not protected from, is crucial and will benefit you immensely.

It allows you to make good choices when it comes to coverage, while also protecting your lifestyle, other assets, and personal property. 

Here’s a breakdown on the basics to help you understand how boat insurance works.

Protecting Your Investment

Boat insurance is all about providing you with financial security and protecting your investment.

It may seem like you need to do hours upon hours of Google searches to understand insurance. However, the basic principle of insurance is quite simple –

When you have something of value that can sustain serious loss or damage, and you cannot afford to pay for those costs yourself, insurance is the middle player that can protect the item.  

In exchange for paying a small premium to the insurance company, you will receive certain assurances if something were to go wrong. Essentially, your provider will have your back in the form of financial protection.

Understand Your Insurance Declaration Page

The declaration page and policy will list the coverage you have purchased and its limits.

Some of the small print details on this page can be especially confusing. This can then lead to frustrations further down the road, especially if you need to file a claim.

So, here are some key terms and conditions to help you fully understand what’s going on.


Also known as the stuff that is not covered as a part of your policy. It’s important to ask about any exclusions or limits on your policy, so there aren’t any surprises if you have to file a claim.

» MORE: A Guide to Boat Insurance Claims


Most insurance policies will contain sections that list the limits of the policy, which are the maximum amounts payable under certain circumstances. This is also important to know when filing a claim. You can ask the insurance company about the limits on your specific policy. If those limits concern you, ask if higher limits are available.


These are essentially add-ons that give you extra coverage in certain scenarios. In some cases, an endorsement may actually limit coverage. Be on the lookout for that.


The amount of financial risk you personally accept for a given type of loss.

» MORE: Five Things to Look for in a Boat Insurance Policy

How Does Boat Insurance Work?

When you buy boat insurance, both you (the insured) and your insurer will agree on an amount of coverage and how much that coverage will cost. This amount is known as the premium, which is paid to the insurance company in exchange for protection from specific risks.

On a standard policy, the premium you pay affords compensation for covered losses that may occur. This is all based on the principle the risk of an economic loss (from fire, theft, etc.) makes insurance worth it and the overall peril manageable.

Does Every Boater Need to Buy Insurance? 

Everyone does not have to buy boat insurance, as it is not required by law in most states. However - it’s still a good idea when you have a pricey investment on the line. Avoiding that level of financial risk makes it sensible.

An alternative is to purchase a more basic insurance policy that provides liability-only coverage.

» MORE: A Breakdown on Liability Coverage

It’s important to note – if you plan to store your boat at a marina or have a lien on the property, both will most likely require you to have insurance.

Why Does the Bank Require Boat Insurance?

A lender is all about protecting their investment as well. They want to ensure that you will not default on the loan because of a loss that you cannot afford.

Because of this, most banks and lending institutions will require you to buy insurance and retain the right to place forced coverage on the boat if you fail to do so, typically at a very expensive cost to you. 

If it makes you feel any better, insurance is a requirement to obtain financing for most large purchases, like a house , car, and other motor vehicles. Lenders want you to be covered against risks that may impair the value of the property before the loan is paid off.

Get a Good Price on Boat Insurance

As mentioned earlier, the premium is the amount of money owed in exchange for the financial protections provided to you by your insurance company. This makes getting a good price on the premium essential.

The most influential factors that will affect your premium are:

  • Boat Value
  • Amount of Coverage
  • Past Claims
  • Boating Experience
  • Seasonal Usage
  • Navigational Waters

The best way to lower your boat insurance premium is through discounts, including:

  • Boating Safety Course Discount
  • Clean Driving Record Discount
  • Layup Discount
  • Multi-Craft Discount
  • Limited Territory Discount

When Should You Buy Insurance?

It’s best to plan on getting a boat insurance policy at the time you purchase the watercraft, and definitely before putting it in the water.

What Does Boat Insurance Cover?

This will all depend on your policy, though in most cases it will cover the watercraft itself, personal property regularly kept on the boat, as well as your personal liability to others.

Coverage can also extend to a number of other risks that are specific to you and the ownership of a boat. This includes:

  • Medical Payments Coverage
  • Towing and Roadside Assistance
  • Named Storm Coverage
  • Hurricane Haul-Out Coverage
  • Cruising Endorsement
  • Dinghy Coverage
  • Watersports Coverage
  • Environmental / Fuel Spill / Pollution Coverage
  • And more

» MORE: Comprehensive Boat Insurance Coverage – What It Is and How to Get It

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