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Boat insurance requirements: the essentials

Do you own a boat? Make sure it’s protected with the right boat insurance.

According to Boating Industry, approximately 100 million Americans go boating each year, and boat ownership has increased during the pandemic. A study from the National Marine Manufacturers Association found that consumer demand for boats increased 12 percent in 2020. Personal watercraft sales were up 8 percent, with 82,000 units sold, while wake boat sales were up 20 percent, with 13,000 units sold. Freshwater finishing and pontoon boats sales were up, too, with an increase of about 12 percent, with 143,000 units sold.

It’s not surprising that people are buying boats. The pandemic forced people to socially distance, but not everyone wants to stay cooped up in their homes. They want to get outside and have fun, and a boat is the perfect way to do that. Add in the fact that summers are getting longer and hotter, according to a study covered by NBC News, and it’s a no-brainer.

At the same time, a boat or personal watercraft is a big purchase. According to Jet Drift, a new jet ski can cost $5,500 to $20,000, while Boat Crunch says a deck boat will cost anywhere from $15,000 to $60,000 – or even more.

A boat or watercraft is an investment, and it’s one you’ll need to protect with the right insurance.

Do You Need Boat Insurance?

You likely already have a homeowners insurance policy and an auto insurance policy. Unfortunately, these policies won’t provide adequate insurance coverage for your boat.

Homeowners insurance policies sometimes provide limited insurance coverage for watercraft or boats, just as they provide insurance coverage for many other personal belongings. However, the key word here is “limited.” The types of losses that are covered will be limited based on the terms of your insurance policy. For example, accidents that occur while out on the water might not be covered.

Even more concerning, the benefit amount will be limited. Many homeowners insurance policies have caps of about $1,000 for boats. This might be good enough if all you have is a canoe. If your expensive watercraft is stolen or destroyed, however, a $1,000 payout simply isn’t going to cut it. Insurance policies vary, so you’ll need to read yours to find out exactly what coverage is available for boats. However, the coverage provided in a home insurance policy won’t typically be enough to cover your boat fully. For that, you’ll need boat insurance.

What Is Watercraft Insurance?

According to Investopedia, the term “watercraft insurance” is often used to describe three different types of insurance – personal watercraft insurance, yacht insurance and boat insurance.

Which type of policy you need will depend on the type of boat or watercraft you have; for example, a jet ski, a deck boat or a yacht. When you apply for insurance, you will need to provide information about your boat or watercraft to make sure you get the right type of coverage.

What Does Boat Insurance Cover?

Insurance policies vary, and different insurance companies will offer slightly different terms. If you want to know exactly what your boat insurance covers, you’ll need to read over the policy.

Although they might not be included in every insurance policy, certain types of coverage are commonly available:

Physical Damage

  • This coverage kicks in if your boat is damaged in a covered loss. Coverage may also be available for equipment and accessories.
  • If your boat is stolen, this coverage kicks in. The policy may also provide some coverage for personal belongings on the boat.
  • If your actions, or the actions of your passengers, result in any property damage or bodily injury to third parties, liability insurance can cover the costs.

Medical Payments

  • If you or your passengers are injured, medical coverage can help with the cost of care.

What Isn’t Covered Under Boat Insurance

Insurance policies typically exclude certain types of losses. For example, losses related to criminal activity on the policyholder’s part will typically be excluded. An insurance company usually won’t pay for losses related to wear and tear or improper maintenance, either.

For detailed information on exclusions in your policy, read over the policy terms carefully.

What Should I Consider When Buying Boat Insurance?

Getting the right insurance is important to protect your investment.

  • Are your limits high enough? Ideally, you want enough property coverage to cover the replacement value of the boat. Also consider that medical and liability costs can be very high.
  • What are the deductibles? If you file a claim, you will need to pay any deductibles out of pocket.
  • Is coverage based on actual cash value? Knowing how the payout will be determined is important.
  • Do you have coverage gaps? If you do, you could end up with a loss that’s not covered.
  • Are any discounts available? You don’t want to pay more than you have to for insurance. Talk to the insurance company to see if you qualify for any discounts that could lower your premium.

Another thing to consider is whether you’re meeting any insurance requirements, such as those that may exist under state law.

Does My State Require Boat Insurance?

Most states require drivers to carry auto liability insurance in case they cause a crash that results in property damage or injuries. Likewise, some states require boat owners to carry liability insurance. If you own a boat in one of these states, you will need proof of insurance. However, not all states have boat insurance requirements for personal boats.

Whether you’re legally required to carry boat insurance will depend on a couple of things, including where you live and what you’re using the boat for. Many states require that owners carry boat insurance. For example:

  • In Arkansas, all personal watercraft and motorboats with engines of more than 50 horsepower are required to carry at least $50,000 in liability coverage.
  • In Utah, motorboats and personal watercraft must carry liability insurance to operate on Utah waters. Boat owners need to carry a minimum of $25,000/$50,000 for bodily injury/death, $15,000 for property damage and $65,000 per accident.
  • In Texas, guidelines posted here do not mention boat insurance requirements, but most people who own nice boats still choose to protect their investment.

Even if you live in a state where boat insurance is not legally required, you may need to carry insurance under the rules of the marina where you dock your boat. If you have financed your boat, your lender will likely require boat insurance.

Do You Have the Right Boat Insurance?

Whether or not you’re required to carry boat insurance, maintaining proper coverage is a smart way to protect your boat and your finances. Contact one of our insurance brokers to discuss your coverage needs.

Not sure where to start? Talk to someone who wants to listen.

A great plan starts with a conversation. Let’s talk about what you need.

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