If you're a new boat owner, you might not be clear about the types of boat insurance available. Much like cars, boats can depreciate, so a lot of boat owners decide to get coverage in line with the age of their boat. In some instances, insurance companies only provide a certain type of insurance because of the age of the boat. Let’s take a closer look at the types of coverage that are best for boats of different ages.
New boats are generally classified as vessels that are three years old or newer. If you own a new boat, you will probably want replacement cost coverage. Should you suffer a total loss, you’d receive the amount the boat is worth from your insurance provider. For example, if you boat is worth $25,000 and you suffer a total loss, you'd receive that amount from the insurance company; this would allow you to buy a replacement boat.
If your boat is between four and ten years old, you’ll likely want to consider agreed value coverage. When pursuing this coverage, you and your insurance provider will agree on a value for the boat upfront. Should you experience a total loss, you will get the amount you agreed upon when you purchased the policy. Even though the agreed value isn't as high as the original purchase price of the boat, the insurance coverage rates will be lower than they would be with a new boat. If a total loss is suffered, the agreed value amount should allow you to buy a boat of comparable age.
In case your boat is more than ten years old, you can expect to obtain an insurance policy that is actual cash value. This coverage will allow you to get the market value for the boat should you experience a loss. Since boats depreciate in value, chances are, the market price could be substantially less than what you paid for the boat or even the amount you ‘d need to buy a replacement boat. In some instances, you'll be able to get the extended agreed value coverage for a boat that's over ten years old. But remember, your insurance rates will be higher for extended agreed value coverage when compared to actual cash value coverage.
Identifying the appropriate insurance policy for the boat can be confusing, but generally, choosing coverage in line with the age of the boat is the way to go. Since boats depreciate in value, the amount you receive for a total loss of a ten year old is going to be considerably less than the amount you would receive for any total loss of a one year old boat, and also the difference in policy types reflects that. Talk to your agent about the right coverage for your maritime needs.
Stay safe on the water. Call Jamison for more information on boat insurance.