Americans love the sense of freedom and adventure that comes from boating. But boating can have a dark side, too. According to the U.S. Coast Guard, there were 4,730 boating accidents that involved 736 deaths in 2009. The price tag of these recreational boating accidents is high: about $36 million dollars per year. And these figures are probably only the tip of the iceberg since the Coast Guard believes that more than 80 percent of all boating accidents go unreported.
Given this level of risk for accidents, it would make sense that boat owners would look for a way to protect themselves, but that doesn’t seem to be the case. A study conducted by Progressive Insurance revealed that nearly one third of U.S. boat owners don’t own a separate watercraft policy. That’s probably because boat owners assume that their craft is covered by their personal auto policy or their homeowner’s policy. This is a mistake that can cost them big time.
The standard auto policy covers the boat trailer for liability with the option to add coverage for physical damage. The boat itself, however, is not covered for liability or damage.
Some homeowner’s policies offer coverage for physical damage for boats, but only for smaller vessels. The typical homeowner’s policy contains a special property limit of $1,500 on watercraft, which doesn’t begin to equal the dollar value of most boats. In addition, the covered perils specific to the boat are also greatly restricted.
There is also liability coverage available for boats under the majority of homeowner’s policies, but once again, it is only applicable to smaller watercraft. The only exception is a boat with an outboard motor. That means that any type of boat you own that is powered by an inboard or inboard-outboard motor is excluded from liability coverage under the homeowner’s policy.
Because most boat owners are unaware how large a property and liability loss they expose themselves to without proper insurance, the Institutional Risk Management Institute (IRMI) has created a list of loss scenarios that demonstrate the need for specialized boat owners coverage:
· Your cruiser collides with a speedboat whose operator fails to yield the right of way, causing extensive damage to your boat. The owner of the speedboat does not have any insurance coverage.
· An expensive fishing boat you just purchased is stolen from your home.
· Your 27-foot-long sailboat is damaged by a hailstorm and high winds while docked at the marina.
· Your sport fishing boat is struck by lightning, incapacitating its electrical system.
· Your daughter’s friend is water skiing behind your boat and falls into the lake, injuring herself, due to the excessive speed of the boat.
· You negligently cause another boat to overturn to avoid a collision.
· Your outboard motor explodes, seriously injuring your next-door neighbor.
These scenarios illustrate the need to factor insurance costs into the equation when buying a boat. If you fail to insure your boat properly, your boat loan may become the smallest of your financial worries.