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Components of A Boat Insurance Policy

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Like auto insurance, a boat insurance policy is divided into two general components: Hull and Machinery, which equates to collision and comprehensive on a car, and Protection and Indemnity (P&I), which is similar to automotive liability insurance.

Hull and Machinery coverage pays to repair or replace a damaged or lost vessel, engine, trailer, and attached equipment, irrespective of who or what caused the damage, and irrespective of the reason the damage occurred, subject to some limitations. Collision, fire, theft, and accidental sinking are covered. Loss due to war or seizure by authorities probably is not covered. Normal wear and tear is not covered, and damage resulting from negligence or poor maintenance probably is not.

Some policies only cover named hazards, that is, they pay only if the loss results from types of catastrophes named in the policy (fire, theft, sinking, etc.). A named hazards policy is considered less desirable, but may be the only kind available to cruisers that venture to foreign shores.

All risk policies are generally broader, and cover any kind of loss except those specifically named. Common exclusions are nuclear war, illegal activities, normal wear and tear, intentional acts, commercial use, and racing. Some exclusions may surprise you, such as loss due to ice and freezing, effects of electricity (other than lightning or fire), arrest or seizure, and faulty design or construction or unseaworthiness of the vessel.

Most policies cover damage to you or your boat caused by another boater if that boater is not carrying P&I coverage (uninsured boater). In this case, after paying your claim the company probably will try to recover its loss from the other party.

P&I coverage pays for your defense if you are sued by someone else for damage or injury allegedly caused by your boat. It also pays the amount awarded in a successful lawsuit, up to policy limit, or a negotiated amount if the company can get the other party to agree to an out of court settlement.

It pays for damage caused by your boat’s wake, by fire spreading from your boat to other boats or facilities, and by ramming or collision. P&I pays medical expenses for passengers, third parties, and may pay for passengers’ personal effects. It may also pay maintenance and cure (room and board and medical treatment) for people who become sick or injured while working on your boat.

The purpose of P&I coverage is to protect your personal assets from damage claims, so select a limit based not on what your boat is worth, but on the value of your other assets, including home and savings, that you want to protect. Your boat P&I policy can be matched to a personal liability umbrella available through your homeowner insurance agent to provide excess liability coverage.

Next Page: Types Of Boat Insurance Policies

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