I reviewed my auto insurance policy on my truck the other day just to make sure I have the coverage I feel I need for a fair premium. Well, since I have a little bit of a heavy foot, my premiums are not rock bottom and shopping for that fair investment with maximum coverage was a bigger task than I’d imagined.
As I struggled with this mundane task, I thought back to an interview I did with the President of one of the top Boat Insurance Agency, a marine insurance specialty company. That complete audio interview is available as a free bonus gift with my Boat Buyers Guide, 24 Mistakes Boat Buyers Make…and, How to Avoid Them!”
The interview was a huge eye opener for me, a boat of over 30 years so I figured I pass along some of the high points. If by some misfortune, you have a claim this summer; this information could just save you tens of thousands of dollars and weeks of lost boating time…let alone the headaches of dealing with insurance adjusters!
So, here are the highlights of that 45-minute Boating Expert Interview:
Agreed/Replacement Value vs. Book Value could be the biggest area that some coverage vary. But, as a normal person, what does it mean and what should you be looking for in your policies fine print?
This coverage determines how much your policy will pay out on a claim if your boat is damaged, sinks or stolen. Check your policy to ensure you’re covered up to a stated agreed value or replacement value. Some general insurance companies will only cover the ambiguous Book Value on a claim.
Here’s an example: Let’s say a client buys a new 260 Sea Ray SunDeck from me for $80,000. If he has an Agreed Value or Replacement Value policy, the policy states an actual dollar amount that he will be paid, in this case $80,000. So, if his boat is stolen 3 years from now, the policy will pay $80,000.
But, if his policy is written as a Book Value and his boat is stolen 3 years from now, the policy will only pay the book value at that time which may be only $65,000. This one seemingly minor verbiage change could result in a huge financial hit which won’t be discovered until it’s too late.
The next major area and I think one of the more common areas for a claim is when there is damage to your boat that can be repaired. How do they handle parts and labor rates on repairs?
There are two main ways insurance companies handle claims on repairs. Let’s say you hit a branch on the lake in your 3 year old Sea Ray and knock out your lower unit. Our MerCruiser Certified Mechanics say you’ll need to replace the whole thing which will cost $3,000 parts and $2,000 labor.
Some general insurance carriers will look at the claim and depreciate the lower unit based on the 3 years of use and only cover say, 75% of the parts cost or $2,250. They may also have a maximum hourly labor rate they will charge which is generally under the standard marine labor rate. So you are left with the choice of using a MerCruiser Certified Marine Mechanic and covering the difference or finding a cheaper mechanic to do the work.
I suggest looking for an insurance company that will pay 100% of the parts and the normal shop rate of any Certified Marine Service Shop. This gets you back on the water faster with no money out of your pocket knowing the job was done right.
Last week I brought up something that no one I know gets excited about, boat insurance. Well, actually that isn’t true. They don’t get excited about it until the coverage they need is not there when an unfortunate incident occurs.
Let’s be honest, accidents happen. Hopefully never to you on your boat, but if they do, I want you to be fully covered! Why?
Because to me, the more happy boaters out on Lake Wylie enjoying their boat means more potential clients to work with when they are ready for a new boat. So, with my intentions on my sleeve, let’s get back to the discussion of Boat Insurance.
After Agreed/Replacement Value vs Book Value and Labor Rates Paid during a claim, there are another couple of areas that could become a major headache if not included in your policy.
- Salvage Coverage
If you’re boat happens to sink, what do you do? Well, in many cases, you’re required to salvage the boat and clean up any environmental contaminants that may have resulted (i.e. fuel or oil spills). The expense of this type of recover could be in the thousands, even tens of thousands depending on the location.
Many insurance policies will not address this type of coverage leaving you to deal with the problem on your own, including the expense. When checking your policy’s small print find out exactly what type of salvage coverage you would have, just in case.
- Towing/Stranded Boater Coverage
Luckily there are many friendly boaters here on Lake Wylie that if you are caught in a tight spot like running out of fuel, caught with a dead battery or other mechanical issues, there is often a friendly face to help tow you to a safe location. But, what if there is not and you’re forced to call a towing company such as Sea Tow?
Well, in many cases, the expense would fall on your shoulders. But, if you have towing coverage, your insurance provider may cover the entire expense up to a set limit.
See, some insurance providers understand the risk of leaving the boat unattended tied to a branch on the bank of the lake. To prevent a potentially worse accident, they try to make it as easy as possible for you to make the decision to transport your boat back to a safe location by covering 100% of the towing and docking expense.
Welcome back, over the past two weeks we’ve talked more about boat insurance than you’ve probably thought about since you bought your first boat. But, I know over the boating season someone will be caught off guard by the lack of coverage. As a reader of my column, I know I did my best to ensure it is not you!
Now, its on to the last 2 items to review are not in the fine print but may require a phone call to your insurance agent and possibly a competitor or two. Ask the questions listed below in those conversations, then its your job to determine; is it a sale pitch or is it a true sales pitch.
- Speed of Claims
As boaters, when the weather is nice and we have time to hit the water, we don’t want anything to stand in our way. Especially, the slow response of your insurance adjusters to approve a claim on your boat.
Many insurance agencies will use the auto claims work flow and require an adjuster to review your marine mechanics estimate for work to be done on your boat if a claim is filed. This could add weeks to the time your boat is inoperable. Then, once approved, how long before the service shop is able to order parts and complete the work because they are concerned the insurance company won’t make final payment without a big hassle.
Well, some insurance companies handle claims of a certain level a little different. Some, will honor a Certified Mechanics estimate and cut a check within days without an adjusters review if the repairs are under a certain amount. When I talked with the President of one marine insurance company, he told me his companies limit was $15,000.
If they handle the claim in that manner, it should cut weeks off the time it takes to have you back on the water enjoying your boat. And, isn’t that the point of being a Carolina Boater anyway?
- Can you lower your premiums and increase coverage
Now that you know all 5 points to ask about, call your current insurance provider and ask them if they cover each and every situation and how they do it. You may be surprised that you are not as well covered as you could be for about the same amount of money.
So, call your provider and other marine insurance specialist and ask them these questions:
- Does my policy have an agreed value or fair market value coverage?
- Do you pay full shop rate if I have a claim and want to us a Certified Mechanic?
- If I have a claim and require parts, will you cover the full cost of the parts or will you depreciate the cost in some manner?
- Does my policy cover salvage an environmental clean up if my boat was to sink?
- If I have a claim and can’t get back to a safe location, does my policy cover towing and dockage expenses?
- If I have a claim, at what level of expense will a claims adjuster have to approve the claim? And, how long will that generally take?
- What is the total cost of my yearly policy?
Now that you have the information, you have two choices. You can make a few phone calls and/or read your policy. Or, you can do nothing and hope it doesn’t matter.
Either way, I hope you never have to find out if you made the right decision or not. But, I can sleep easy at night knowing I provided the information that I think all boaters should be aware of so they continue to be happy Boaters for years and years to come.