Every Boat Policy Comes with an Anchor


Every Boat Policy Comes with an Anchor

His parents have had their insurance in your agency since the first year you started in business. Noah has had his insurance with you since he graduated from college twenty years ago. He considers himself a sophisticated buyer. Noah does the research necessary for his major purchases. In fact, you’re aware that it took him nearly five months to make up his mind about the nineteen-foot Ranger fishing boat he purchased.

He told you about its top-end of 46 mph powered by its Mercury 115 HP outboard motor. He swears he got a really good deal on it at $22,100 new and you believe him — given his family’s penchant for tracking down the best value.

You turn the marketing of his boat policy over to your customer service representative and he runs it through several companies’ rating programs. You sell him a policy for $279 and are confident that your diligence found him the lowest price in your agency. You rarely consider commission when selling a policy, but in this case you know you didn’t sell him a policy that would have paid your agency twenty percent on new and renewal, and did sell him a policy that is going to pay you 12.5 percent new and five percent on renewal. The loss of commission doesn’t bother you because you write several policies for him and want him to have the best value. Besides the company you placed it with makes it really easy to order the policy so your CSR likes working with them.

But did you find a policy that provides great value? ..and all the coverage you need?  Policies vary greatly.

Does your policy include mechanical breakdown coverage?

Most boat policies provide coverage for accidental direct physical damage to the boat. An example of this is when your client crashes their boat into a dock or runs onto a submerged rock.  Most boat policies however, exclude coverage for mechanical breakdown. If the engine ingests debris and overheats …or if some internal engine part fails and the engine is then ruined…most policies will not cover this damage.

The good news is certain boat insurance policies do provide mechanical breakdown coverage!

Did you sell the policy that does? The Ranger bass boat we used in our example above has half its value and purchase cost of the boat in the boat’s engine. A Mercury 115 HP engine cost about $12,000. Is it covered for mechanical breakdown?  You want to be certain it is.   And you need to make sure the mechanical breakdown coverage covers the ENGINE  (not just the lower unit).  

Always be certain you have sold a policy written on an Agreed Value basis.  This means in the event the boat is a total loss the insured will be paid the “Agreed Value” as it appears on the policy declaration page. This will avoid the surprise and potential gap in coverage you can have with an ACV policy.

Boat and yacht ownership (and insurance) has a very interesting issue. If the boat sinks, the boat owner is financially responsible for the raising and the removing of the wreckage of the boat. Question? Does the boat insurance policy cover the cost of raising and removing the wreckage?   Many boat policies do not cover this cost and you need to make sure you sold your customer a policy that does cover these costs.  Raising a large vessel off the bottom can cost tens of thousands of dollars. Don’t leave your insured without this coverage.

On yet another interesting twist in boat ownership….did you know if a boater were out boating and found themselves in imminent danger (i.e. at risk of sinking for some reason) ..that the rescue vessel coming to their aid and providing a  “rescue” of their vessel is entitled to the full value of the rescued vessel?  Yes, this is true. If the rescue vessel were to put a temporary patch on a vessel taking on water and then tow that vessel safely back to shore…the rescue vessel, (i.e. salvage team), would legally be entitled to the full value of the vessel they rescued.  For example, if a $75,000 boat had sustained $10,000 in damage (i.e. a $10,000 hole in the boat) …this would mean the salvage team would be entitled to a $65,000 marine salvage award.  This also means the owner of the rescued vessel either pays $65,000 or receives a salvage lien for $65,000.   The question for you is  …did the boat insurance policy you sold provide your client with coverage for a marine salvage claim. Many policies do not. Please be careful to sell your client a policy that does cover this potential gigantic exposure.

A few other things for your consideration:

Does the hull deductible match your customer’s appetite for self-insured risk? Some companies have ten percent deductibles, while others go as low as $100.

Does the policy you sold him contain accidental fuel spill coverage?

Did you cover the trailer?

If your customer is left with a loss that isn’t covered, when it could have been, he may go fishing for a new agent, and take his extended family with him.

James Holm


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