Purchasing a boat is a major investment that deserves every bit of insurance attention your car and house get. If you’re a new boat owner you may be unaware that there are two basic types of insurance available for your craft. Which type you chose, along with policy enhancements you might add, is determined largely by your needs and budget.
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Whether you purchase your boat insurance as a separate policy from an experienced provider, or as an extension of your homeowners policy, is another factor to consider. Both have their pros and cons which will be discussed here.
Actual Cash Value Coverage
The cost of boat insurance will be partially based on the type of value coverage you select. Actual cash value (ACV) policies are the type one would normally purchase as part of a homeowners insurance policy. They are liability and replacement products designed to cover the policy holder at levels equal to the current market value of his boat. The greatest appeal of the ACV policy is the relatively low premium. On average, such insurance coverage can be added to a homeowners policy for less than $1,000 annually.
The drawback to ACV policies lies in the fact that depreciation and market conditions reduce the value of the policy with every passing season. The longer you own a boat, the less value it has on the open market. The obvious exception to that is an older vessel which has been restored to original condition and thus, has added value as a collector’s item. Liability concerns are also a part of ACV policies, but increased limits can be purchased to avoid such issues.
Agreed Value Coverage
Agreed value coverage (AVG), also known as hull value (HV), is based on a predetermined value agreed to by both the insurer and the boat owner. This type of policy will cover loss and damage at a set value for the life of the policy. The obvious advantage of this type of insurance is that your policy value never goes down due to depreciation or poor market value. AVG policies also tend to be more generous when it comes to personal property brought on to the boat.
Higher premiums and the need for negotiations are the main downsides of AVG coverage. Policies are custom tailored to the individual vessel, requiring the insurer to conduct all due diligence in regard to its value. Be prepared to negotiate back and forth before reaching an agreed value. As far as premiums go, you could pay several thousand dollars per year if your boat is more than just a small cruiser.
Things Your Insurance Should Cover
There are certain things that boat insurance should cover. Regardless of which type of boat insurance you choose, coverage limits vary from one policy to the next. Liability for boat damage or injury caused during an accident is standard for every policy. But there are other types of things boaters need to consider when purchasing policies.
- The first is whether or not to insure the boat during off-season storage. A boat in dry dock is not always a safe boat. For instance, bad weather could knock a boat off its stands if it was not properly secured at season’s end. Such a fall would probably damage the vessel, along with any others nearby. Insuring against such accidents is a good idea.
- Another potential scenario to consider is an accident which may have an environmental impact. Local and state governments are increasingly sensitive to environmental damage done by recreational boaters and campers. Some are even beginning to charge owners for the cost of clean up if an accident pollutes the environment. A boating accident which results in spilled fuel could end up being rather costly to the owner if his insurance doesn’t cover such accidents.
- Finally, larger boats tend to produce wakes that can be damaging to smaller vessels. Posted speed limits in congested areas are designed to mitigate such issues, but every now and again accidents still occur. If the wake of a larger vessel causes a smaller one to capsize, for example, the owner of the larger vessel could be held responsible. Even more so if it is determined that he failed to heed posted speed limits. A comprehensive insurance policy will cover boat owners for any accidents, whether they are contact-related or not.
Keep in mind that some states require boat insurance under certain circumstances, while others do not. Check with your state insurance or vehicle registration department for details on current regulations, and also with your financial institution if you took out a loan to purchase your boat. Free boat insurance quotes are at your fingertips with the search tool below.
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