Boat Insurance Policy Basics: Agreed Value vs Actual Cash Value, Navigation Limits, Storm Deductibles and Exclusions

This decides what you get after a total loss.

• Agreed value: you and the insurer agree on the boat's value when the policy is written. For a total loss, you're paid that amount. Discover Boating notes these cost more up front but don't depreciate on a total loss. BoatUS adds that partial losses still carry the deductible, and some items may still be depreciated.
• Actual cash value (ACV): the payout is the boat's market value at the time of loss. For partial losses, BoatUS says you get the loss minus depreciation and the deductible. Cheaper premium, more out of pocket after a loss.
• Replacement value: Mercury's insurance article notes a few insurers offer full replacement on new boats, usually for only a year or two.

If you financed the boat, Mercury warns that ACV can leave you owing more than the payout after a total loss (our loan add-ons guide covers GAP). If you add electronics or repower, Mercury suggests getting a written appraisal and asking the agent to update the agreed value.

BoatUS explains that insurers may want a survey on older or larger boats, and may not insure a boat at a survey value far above published price-guide values. If something major shows up in the survey, the insurer may bind the policy only on condition that you fix it. Our survey prep guide helps you get ready.

The policy defines the waters where you're covered: inland, coastal, a distance offshore, specific regions, or seasonal limits. Practical Sailor notes underwriters define the covered waters and that you should check before going beyond them. Some policies keep boats out of hurricane-prone areas during part of the year. Discover Boating warns that breaking a policy "warranty," such as going outside your navigation limits, can mean no payment for a loss.

Planning a trip to the Bahamas, Canada, Mexico or farther offshore? Call the agent before you leave and get any extension in writing.

Some policies, especially on larger boats in cold climates, give a discount for a lay-up period when the boat is stored and not used. Discover Boating lists not using the boat during the lay-up period as a common policy warranty. If you want to launch early or use it late, ask the insurer to change the dates first. Also check what the policy says about ice and freeze damage: BoatUS describes freeze coverage as an optional extra in some policies, often tied to professional winterizing.

In hurricane areas, look for a separate named storm or hurricane deductible. Discover Boating warns these can be 10% or more, often a percentage of the insured value rather than a flat amount. Also look for:

• A required hurricane plan: BoatUS notes insurers in places like Florida may ask for a short written plan saying where the boat goes in a storm, who looks after it and whether it's hauled.
• Haul-out help: some policies pay part of the cost of hauling or moving the boat ahead of a named storm. One insurer's policy pages, for example, describe paying half the cost up to a set limit.
• Rules about binding new coverage: BoatUS notes insurers may not write new policies when a named storm is approaching.

Our hurricane prep guide covers the practical side.

These are where cheaper policies often fall short. BoatUS describes three tiers:

• Salvage (recovering a sunk or stranded boat) may be deducted from your hull payout, paid separately up to a percentage of the insured value, or (in the most generous policies) paid separately up to the full insured value.
• Wreck removal, when a law or agency requires you to remove the wreck, may be limited to a small percentage of the hull value in some policies, while the most generous pay it out of liability coverage up to the liability limit.
• Towing to safety is often an add-on. Discover Boating notes it can cost hundreds of dollars an hour. Many owners carry a separate on-water towing membership as well.

• Compare your boat liability limit with your auto and home limits. BoatUS notes injury settlements can be very expensive and higher limits usually cost little extra.
• Check fuel-spill liability: BoatUS explains some policies lump it into the general liability limit, while better ones give it a separate limit.
• Uninsured boater coverage protects you if someone without insurance injures you.
• Who can drive: BoatUS says family members and others using the boat with your permission and without pay are typically covered, but renting the boat out removes coverage, and a paid captain or crew isn't covered under liability. A typical pleasure policy isn't written for carrying paying passengers. The Massachusetts Division of Insurance, for example, says its boat insurance information covers private pleasure use and points anyone running a boat commercially to other marine insurance. Separately, federal rules (46 CFR 15.605) require a boat carrying passengers for hire to be run by a Coast Guard-credentialed operator, such as a captain holding an OUPV ("six-pack") endorsement. Ask your agent before anyone pays to ride, and see our passengers-for-hire guide.

BoatUS notes the trailer may not be covered automatically and may need to be added. Physical damage to the trailer can be covered under the boat policy, but injury or property damage caused while towing on the road is usually handled by your auto policy. Ask both agents.

Discover Boating notes even "all risk" policies exclude things such as wear and tear, marring, denting, animal damage and manufacturer defects. The big one is consequential damage: BoatUS explains that half of sinkings at the dock start with a small part below the waterline failing (stuffing boxes, outdrive bellows, hoses or clamps, sea strainers). No policy pays for the worn part itself, but policies differ on whether they pay for the boat that sank because of it. The best ones cover resulting fire, explosion, sinking, collision, dismasting and stranding. Also look for exclusions about ice and freezing, mold, racing, commercial use and operators who aren't listed.

Many policies require you to keep the boat in seaworthy condition, protect it from further damage after a loss, report losses promptly and cooperate with the insurer's surveyor. The Massachusetts Division of Insurance's boat insurance page sums up what's usually expected after a loss:

• Give immediate notice of a possible claim to your insurer or agent, and call the police if it's a theft.
• Protect the boat from further damage. If you make temporary repairs, write down what you did and keep every receipt.
• Give the insurer a list of damaged or stolen property with photos, and keep a copy.
• Don't throw away damaged items until the adjuster says you can.

Your own policy's wording on these duties is what counts, so find that section and read it now. Some insurers require captain training for owners stepping up to a bigger boat; BoatUS describes insurers asking for days to weeks of training with a licensed captain. Write down any such condition and meet it.

• Lenders usually require physical damage coverage on a financed boat. Discover Boating notes most lenders cap the deductible (often at 2% of the insured value) and may require year-round coverage. Ask the lender exactly what it needs and how it wants to be named on the policy.
• Marinas often require proof of insurance and minimum liability limits, and some ask for more. Check your slip contract (our marina contract guide covers this) and make sure your policy matches it.

Compare policies line by line: valuation, navigation area, deductibles (regular and named storm), salvage, wreck removal, fuel spill, towing, liability, medical payments, uninsured boater, trailer and personal effects. BoatUS warns that comparing only the premium can leave you disappointed when you file a claim. Discover Boating notes discounts for boating courses, clean records, freshwater use and bundling. If a quote comes from a surplus lines company (common for boats standard insurers turn down), know what that means: the Massachusetts Division of Insurance explains that these companies aren't licensed or regulated by the state and aren't members of the state guaranty fund, which protects policyholders if a licensed insurer fails. Ask your agent which kind of company you're buying from. Review the policy at every renewal and after any upgrade, move or change in how you use the boat.