Know Your Insurance Policy

A good portion of my job, as a Marine Surveyor, involves working as the “eyes ‘n ears” for insurance claims adjusters, when a boater has an insurance claim.  My job task is to verify serial numbers, take photos, and assess the damage in terms of being accident related, versus normal wear and tear.  I sometimes run across an insured boater who doesn’t have a clear understanding of his or her coverage, and how it works.

The 2014 season is upon us.  Now is a good time to touch base with your insurance agent, and ask a few questions regarding the insurance policy you have purchased.  An insurance policy is an agreement between you and the underwriter, whereby you will be reimbursed (indemnified) for a loss as described in the agreement (your policy).  It is important to understand the policy’s description of a loss, and how you will be reimbursed.  There are terms used in these agreements that should be understood, prior to the day of a loss.  Different types of policies are available, and they work in different ways.  There could also be restrictions of where, when, and how the boat will be used.

First of all, let’s discuss the definition of an accident, or accidental loss.

An accident is defined as a sudden and unexpected event taking place without expectation, upon the instant, rather than something that continues, progresses or develops.  An accident is an event that takes place without ones foresight or expectation; an un-designed, sudden and unexpected event.

There are two basic types of recreational boat insurance policies: 

There is an AGREED VALUE policy:  With this policy, you have made an agreement with the underwriter that your insured property (your boat) will be insured at some predetermined value.  In this policy, the insurance company agrees to repair or replace your boat for a dollar amount, up to the value agreed to on the policy.  There is no consideration of depreciation.

Then, there is the ACTUAL CASH VALUE (ACV) policy:  The primary difference between the two policy types is how depreciation is handled.  Where an AGREED VALUE policy covers the boat based upon it’s value when the policy was written, an ACV policy factors depreciation into the replacement value; the amount you will be reimbursed.  Agreed Value policies generally cost more, up front, whereby ACV policies usually will have a lower monthly premium.

It is important to understand your policy type, to avoid an unpleasant surprise in the event of a loss.

Other factors to consider when buying an insurance policy:

What does the policy cover?

Just because your policy may say it is an “all risk” policy, you should be aware of any exclusions.  Read them carefully.  Typical exclusions are Wear-and-Tear, Marring, Denting, Animal Damage, and Manufacturer’s Defects, and Freeze Damage.

Most policies will cover items which are permanently attached to the boat, such as a marine radio.  They may also cover items such as anchors, oars, trolling motors, tools, seat cushions and life jackets.  You should discuss coverage of these items with your agent.

Does your policy cover towing?

Will it pay to salvage a sunken boat?

Are there specified dates in which you can use the boat?  (winter lay-up periods)

What geographic areas are you allowed to cruise?  Great Lakes?  Near Coastal?

Are discounts available for education courses such as the Safe Boating Courses offered by the Coast Guard Auxilliary and Power Squadron?

These are just a few considerations I wanted to bring to light in the beginning of a new boating season.  We all hope to never make an insurance claim.  But in the event of a loss, it can save a whole lot of frustration to have a good understanding of your coverage.  A good place to find these answers is to consult your insurance agent.

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