A large and increasing number of individuals enjoy the benefits of owning and using a personal watercraft such as a sailboat or motorboat. Owning or operating such watercraft, however, can also be a potential source of serious financial risk. Personal liability arising from losses suffered by others, or the cost of repairing or replacing a damaged, destroyed, or stolen watercraft can be very high. Further, some states, yacht clubs, marinas, and lake associations have mandatory watercraft liability requirements, compelling owners to maintain liability insurance as a condition of licensing or use of facilities and recreation areas.
Sources of Watercraft Insurance: There are a number of sources of insurance coverage for watercraft owners.
Homeowner’s insurance: A limited amount of liability coverage for certain types of small watercraft is provided in many homeowner’s1 policies.
Endorsement of a homeowner’s policy: Some homeowner’s policies may provide for coverage for watercraft through endorsement and payment of an additional premium.
Comprehensive watercraft insurance: Such policies can provide a boat owner with higher levels of coverage, as well as protection against a broader spectrum of perils, than does a homeowner’s policy. Coverage can also be provided for situations unique to watercraft ownership and use.
Watercraft Insurance: Coverage Under the Policy – In many respects, the protection provided by a comprehensive watercraft insurance policy (also known as a boat owner’s policy) is similar to the coverage offered in many automobile insurance policies; protection is provided against a number of perils in one package. Typical coverage2 includes the following:
Physical damage: Also known as hull coverage, this coverage protects the insured against damage or loss to a covered watercraft, including trailers,3 outboard motors, equipment, and furnishings. Insurance is typically provided on an all-risk basis, subject to certain standard exclusions. Reimbursement is generally based on actual cash value, although some insurers may offer policies using either an agreed value (face amount of insurance) or a replacement cost option.
12 Policy forms for renter’s and condo owners may also provide such coverage. The specific coverage and terms of a policy can vary from company to company and from state to state. 3 In some policies, coverage on the trailer is optional.
Liability coverage: This coverage is sometimes called protection and indemnity (P&I) coverage. It protects the owner against losses from legal liability arising from bodily injury or property damage caused by a watercraft accident. Coverage is normally provided up to a specific dollar amount.
Medical payments: This policy provision pays medical expenses because of an injury sustained during an accident involving the insured watercraft. Coverage is usually provided up to a specific dollar amount.
Uninsured boater: This coverage pays for bodily injury sustained in an incident caused by an uninsured boater. The provision usually pays up to a specified dollar limit and is normally offered as an optional coverage.
Look for Part 2 of this article in our July issue.
Julie Ngo is a State Farm Insurance Agent located at 28410 Old Town Front Street in Temecula. She can be reached at (951) 695-2625.
