Provides protection against physical damage losses to the boat, machinery, and equipment. This
is referred to as Hull Insurance. While the marine insurance industry does not use the terms comprehensive and
collision, if you are familiar with these terms for automobile insurance, this would be the equivalent
coverage. Each insurance company will have a different definition of Hull Insurance. One of the
insurance companies that we represent defines it as “accidental, direct physical loss or damage to the
boat and equipment as well as salvage charges.” Hull Insurance is broad and may include spars, sails,
machinery, furniture, dinghies/tenders, outboard motors, fittings and other equipment typically required
for the operation or maintenance of the vessel.
How you're paid in the event of a loss
When discussing how you are paid, you need to distinguish between a total loss and a partial loss.
Most of us are concerned how the policy responds in the event of a total loss. The likelihood
of a total loss is much less than a partial loss; therefore it is important to understand how the policy
pays for both.
There are three types of policies -- agreed value, actual cash value, and replacement cost.
One of these three could be paid in the event of a total loss. For a partial loss, you will need to know if the
policy is paying replacement cost or depreciated value.
When discussing insured value and how a policy will pay, most people think about a total loss.
This is important, but the majority of claims are partial losses. Depending on how your policy pays a partial loss could cost you several thousand dollars above your deductible.
There are two different ways to pay in the event of a partial loss. One is to replace the
damaged items new for old without deducting for depreciation. The second is to depreciate the damaged items.
Depreciated Value is defined as Replacement Cost less depreciation. Most companies use a non-published
depreciation schedule that applies to partial losses. An example may be 7% depreciation per year
on a stern drive or 15% depreciation per year on canvas. You will want a policy that pays replacement cost
for a partial loss when available.
Each insurance company will apply Replacement Cost and Depreciated Value differently. See
comparison chart below for examples of how companies
settle partial losses.
Some companies do not provide replacement cost coverage for partial losses. If the boat is
insured on this policy form, then no matter the type of loss, the replacement parts are subject to depreciation.
If the part costs $2,000 and is subject to 20% depreciation, you would be paid $2,000, less $400 depreciation,
less your deductible.
Some companies provide replacement cost for partial losses until the boat reaches a certain age.
The age will vary with each insurance company. Once a boat reaches that age, all partial losses are settled on an actual cash
Companies that provide replacement cost for partial losses name specific items that are
subject to depreciation. These items have a limited lifespan and include canvas, sails, cloth, trailers, and plastics.
They also specifically name items to be
depreciated based on the item’s age. Outboards, stern drives, and internal machinery are examples of items
that change from replacement cost to depreciated value based on their age. Each insurance company has
different specifically named items and different ages when items change from replacement cost to actual cash
Replacement Cost for a partial loss is what you want when available. A depreciated value can cost you several
thousand dollars. Below are examples to help explain how replacement cost vs. depreciated value work.
Example 1 is an 8-year-old stern drive boat with a $500 hull deductible that hits a submerged object. The
replacement cost of the stern drive is $8000.
Insurance company A provides replacement cost coverage until the stern drive is six years old. They will
apply 60% depreciation (7.5% per year) to the $8000 replacement drive and then apply the $500 deductible.
Insurance company A will pay $2700 ($8,000 less $4,800 depreciation, less $500 hull deductible).
Insurance company B provides replacement cost coverage until the stern drive is 10 years of age. They will
pay $7500 ($8000 less the $500 hull deductible).
Example 2 is a boat with a $500 hull deductible that suffers wind damage to the flybridge enclosure. The
fly bridge enclosure is 2 years old, and the replacement cost is $5000.
Insurance company A provides replacement cost until the fly bridge enclosure is three years old. They will
pay $4,500 ($5,000 less the $500 hull deductible).
Insurance company B provides replacement cost but specifically names canvas as a depreciated item. Insurance
company B will apply 20 percent depreciation to the replacement cost. They will pay $3,500 ($5000 replacement
cost, less $1,000 depreciation, less the $500 hull deductible).
There are other items to consider. For example, if the stern drive has to be replaced, most companies will
apply a reduced depreciation if you agree to a remanufactured stern drive. This can save thousands of dollars
in depreciation. Depreciation is only applied to parts (real property). Depreciation is not applied to labor or storage
In the event of a total loss, your policy may pay you based on the Agreed Value, Actual Cash Value or the Replacement Cost Value.
In explaining how these three policy forms are different, I will use a three-year-old boat, insured for $40,000 which was destroyed by fire.
Agreed Value is easy. You and the insurance company agree on the value of the boat before the loss. Using our example, you would be paid $40,000.
If the current value of the boat at the time of the loss is $20,000 or $55,000, you would be paid $40,000, the Agreed Value of the boat.
Market Value - Actual Cash Value
The insurance company will pay the insured value or the current Market Value of the boat at the time of the loss, whichever is lower.
In our example, if the Market Value is $25,000, this is the most you will be paid. If the Market Value is $55,000, then you
would be paid the insured value of $40,000. The Market Value is determined by the insurance company from sources such as a used boat price
guide and other boats listed for sale.
The newest option is Replacement Cost. A Replacement Cost policy agrees to replace the boat with a new boat. You are required to purchase this
coverage when the vessel is new and the coverage is only available until the vessel is two or three years old. Our $40,000 three-year-old boat
has a Replacement Cost new today of $45,000. The Replacement Cost policy would pay $45,000 for a new boat. Some policies may specifically state
they will pay a percentage over the amount the vessel is insured for, 20% for example. Once the boat reaches the age where replacement cost is
no longer available, the policy form will be changed to Agreed Value.
Policies are written using an "all risk" policy form. “All Risk” means that
all damage to the boat is covered unless specifically
excluded. When you have an "all risk" policy, you need to review the policy exclusions to see what is
covered. If it is not excluded, then it is covered.
Not common in the industry but a policy could be written using a “named peril” policy form.
A “named peril” policy only covers what is specifically stated or named in the policy. Fire, lightning, wind and
theft would be common named perils. There is no way a “named peril” policy can name all the unexpected, odd situations that can happen to a
All policies have exclusions. The excluded items vary from company to company but
they all include loss caused by wear and tear, gradual deterioration, weathering, insects, mold, animals and marine life.
Some companies include coverage for damage caused by zebra mussels; others do not. Additionally excluded items may
include marring, scratching or denting, osmosis or blistering, latent defects, manufacturer's defects, defect in designs, and
corrosion. Some policies have machinery damage exclusions while others do not.
Stern Drive - Outboard and Internal Machinery
Each insurance company will vary on how your motor is covered. Due to the high probability of loss, damage to
stern drives and outboards is one of the most difficult items faced by you and us as your insurance agent. If
you have not already reviewed the partial loss section, we recommend you review the items in this
section that explain Replacement Cost and Depreciated Value.
Engines can be insured on replacement cost or depreciated value. If the policy is written on
actual cash value, then the engine will always be depreciated in the event of a loss. If the policy is written on agreed value, replacement new for old without a deduction
for depreciation, but only until the engine reaches a certain age.
Companies that use agreed value may repair or replace a newer engine without deduction for depreciation. As the engine ages, the
replacement cost may change to depreciated value. The age that a company will apply
depreciated value varies. Some will apply depreciated value on all outboards or stern drives regardless of
age. Others change to depreciated value at age two, five, seven or ten. The age when depreciated value is applied
can be different for outboards, stern drives, and inboards.
Example: An 8-year-old stern drive boat with a $500 hull deductible that hits a submerged object. The replacement
cost of the stern drive is $8000.
Insurance company A provides replacement cost coverage until the stern drive is six years old. They will apply
60% depreciation (7.5% per year) to the $8000 replacement drive and then apply the $500 deductible. Insurance
company A will pay $2700 ($8,000 less $4,800 depreciation, less $500 hull deductible).
Insurance company B provides replacement cost coverage until the stern drive is ten years old. They will pay
$7500 ($8000 less the $500 hull deductible).
If the stern drive has to be replaced, most companies will
apply a reduced depreciation if you agree to a remanufactured stern drive.
A Tender or Dinghy is a small boat used to service the larger boat. Some policies automatically
include a Tender as a covered item in the hull (boat, machinery, and equipment) definition. If automatically
covered, it may have the same deductible as the boat. Most insurance companies will allow you to schedule the
Tender to obtain a lower deductible for an additional premium. Companies provide coverage on agreed value or
actual cash value.
Some companies do not provide coverage automatically, and you have to provide us with the details of the tender for coverage. Many companies provide specific requirements regarding size or horsepower to qualify as a tender; others just say small boat. A Personal Watercraft is specifically excluded and not considered a tender.
If you have a second boat that you use to go out on a regular basis that it not being used to service the
larger vessel, you need to have this boat insured separately.
Most policies can provide coverage for a trailer if requested. This coverage is usually insured
on an actual cash value basis.
The main note of interest regarding the trailer is that there is no liability coverage for
the trailer or the boat when connected to a vehicle. The liability on the vehicle is the liability on the
boat and the trailer. If the boat or the trailer is on the road and comes loose and causes bodily injury or
property damage to a third party, the liability coverage on the vehicle is responsible.
If the boat or trailer suffers physical damage while being trailered, the damage is always covered by the boat policy.
Some states require proof of liability insurance on the trailer. This proof is provided by the automobile
Towing and Emergency Service
Most policies provide coverage for towing and emergency services. Some policies automatically
include the coverage while on others it may be optional.
Some companies only provide coverage while on the water or have two separate limits and premium for water vs land. Others provide coverage for both water or land towing.
Towing provides coverage to the nearest place where necessary repairs can be made. This may not be
to your repair facility.
Emergency services include such items as delivery of fuel, oil, parts, battery and emergency labor while away
from safe harbor. The cost of parts, batteries, fuel or oil is not included.
The amount of towing and emergency services coverage varies by company. It may be $0 to $10,000. The
amount of coverage for most companies is per occurrence, but we have seen companies that use an aggregate limit.
The hull deductible is the amount you will pay in the event of a loss to the hull, machinery, and equipment.
Some insurance companies will use flat deductible amounts like $250, $500, $750 or $1000. Others will
use a percentage of the boat value. 1% of the boat value or $250 is the minimum deductible available.
Insurance companies give a discount in premium if you agree to a deductible higher than the minimum. The
savings in premium varies per company. The largest percentage of savings comes between the $250 and
$500 (1% and 2%) deductibles. So if you have a $40,000 boat and the minimum hull deductible is 1%, your
deductible would be $400. Most insurance companies will require a higher minimum deductible as the boat ages.
The minimum hull deductible may go from $250 to $500 or 1% to 2%.
Trailers, tenders and personal effects are not included in the hull deductible. These items have deductible
amounts of $100, $250 or $500 and generally can not be changed.
Note of interest. Most policies do not apply the hull deductible in the event of a total loss.
Some insurance companies have a separate electronics deductible. This deductible is lower than the hull
deductible. If you have a $40,000 boat with a 1% ($400) hull deductible, this $400 would apply to electronics
unless you have an electronics deductible.
The electronics deductible is a flat amount of $250, $500 or other specific amounts. Some programs will automatically include a lower electronics deductible while others add it by endorsement for free
or for an additional premium. Some companies do not offer a lower electronics deductible.
Named Storm Deductible
Hurricane, Tropical Storm, Tropical Depression
A Named Storm Deductible (NSD) is common today for vessels in areas subject to hurricanes, tropical storms,
and tropical depressions. The NSD is higher than the normal hull deductible and will be applied if the boat
is damaged due to a named storm.
The NSD varies with each company. Some do not have a NSD; others will have 2%, 5% or 10% of
the boat value or 2 times the hull deductible. The most common are 5% of the hull
value with 10% in high storm areas such as Florida and the remainder of the Gulf Coast.
In addition to the deductible being higher, the NSD also applies in the event of a total loss.
Use of Boat
Most insurance companies provide coverage for private pleasure use only. If you carry passengers for a
fee or collect any fee for the use of your vessel, you would be in violation of the use clause.
Some markets that provide coverage for pleasure use have an endorsement that will allow occasional charter
coverage. If you use your boat as a full-time charter boat, you will need to get a charter boat policy.
Using your boat to entertain clients does not violate the pleasure use. Most companies also do not
consider the collecting of a prize from a fishing tournament to violate the pleasure use, but there are some
companies do not allow the collection of prizes.
Pollution - Fuel Spill
Pollution has always been covered under the liability section of policies. In recent years
we have seen companies providing a separate limit for Pollution/Fuel Spill coverage. Most
companies do not make pollution/fuel spill coverage dependent on a covered loss, but some do.
We have one market that provides a separate limit of $939,800 and does not make it a requirement to be a
We have one market that does not provide a separate limit. They provide coverage within the liability
limit and will increase the pollution/fuel spill to the legal limit of $939,800 if your liability limit is lower.
This is not the same as having a separate limit, having a separate limit is best. This market does not make it required that it be a covered loss.
We have a market that includes pollution in the liability limit, and they do make it a requirement that it be
a covered loss.
Another interesting point regarding fuel spill coverage is that most insurance companies do not pay fines or
Hurricane Haul-out coverage reimburses some or all of the expense of having the boat hauled in the event of a
hurricane, tropical storm or tropical depression.
Some insurance companies automatically include the coverage; some add the coverage by endorsement for an
additional premium, and others do not provide the coverage.
The coverage states that if a named storm is predicted to hit your area within a specific time
period, the insurance company will reimburse you to have the vessel hauled out of the water.
This coverage usually can not exceed a specific dollar amount, and some companies will share in the cost
versus paying the total cost.
Salvage charges are amounts paid to protect the vessel against additional loss. This could be as simple as
adding a barrier to a broken window or as complicated as a salvage company protecting the vessel if grounded.
Most marine insurance companies provide salvage charges as part of the normal conditions. Other
companies will insure your boat for physical damage but do not provide coverage for salvage charges.
You should be aware if your policy provides this protection.
Another important coverage is wreck removal. If your boat sinks, normally it will be required that the boat is raised. Wreck removal is part of the liability section of the policy.
Lay-up is the time period the vessel is not used. Normally lay-up is for boats in northern climates that are not used
in the winter months. Discounts are applied for boats that are laid-up.
The boat can be laid-up ashore or afloat. The boat is fully covered during the lay-up period subject to
general conditions. These conditions can include that the vessel is not navigated, it is not ready for immediate use, and it is not
used to liveaboard. Not ready for immediate use means the vessel must be winterized. The use of heat to
keep the engine or system from freezing does not qualify for “not ready for immediate use.” Most companies will allow 1 night or 3 or 5 consecutive nights that you can stay aboard without violating the liveaboard requirement.
Most insurance companies do not offer a lay-up for boats less than 27’. They are written with 12
months navigation, and the rate is based on the state where the vessel is normally stored.
Personal Effects are automatically available with most policies. By design the coverage is
narrow; most items on the boat are considered part of the boat and are, therefore, covered under hull insurance.
Personal Effects can include items like clothing, fishing rods and reels and scuba equipment.
To understand Personal Effects, you have to review the definition of what is covered
as the Hull (boat, machinery, and equipment). A typical definition of Hull may include spars, sails, machinery,
furniture, dinghies/tenders, outboard motors, fittings and other equipment normally required for the operation
or maintenance of the vessel.
Items such as electronics, safety equipment (life jackets), furniture and a ship to shore cord would all be considered
to be part of the boat and not covered by personal effects coverage.
If you are transporting your boat over land on a trailer that you own, most insurance policies do not have
any restrictions or exclusions. If you are using a commercial hauler to transport your boat, many
companies will exclude coverage while the vessel is being transported. In many cases, the companies will allow you to buy the coverage back.
Some companies may exclude coverage anytime the vessel is being transported commercially, and others will have
a limitation such as if more than 200 or 300 miles radius from your home port.
One company we represent does not make it a condition of a commercial hauler. They say coverage is limited to a 250-mile radius of your home port if transportation is by other than a trailer you own. In this case, it is not only
a commercial hauler but any trailer you do not own.
We also represent two programs that say land transit is limited to a 250-mile radius of the home port. This applies
to a trailer you own or to a commercial hauler.