Boat Insurance Tips from Stafford Marine Insurance
January 23, 2012
When it comes to insuring boats, few companies have a longer history than Stafford Insurance. Founded in 1881 in Fall River, Massachusetts, Stafford is wrapping up its 130th year in the marine insurance business.
In the early days, the company insured the trading vessels that sailed and steamed in and out of Fall River, as well as their cargoes of lace and other textile goods. As local manufacturing fell on hard times and recreational boating began to blossom, Stafford made the switch to handling individual boat policies. From commuter boats and Chris Crafts to carbon-fiber sailboats and hybrid-powered cruisers, Stafford has been there from the beginning of recreational boating in New England.
Today, that tradition continues, with company president Jay Kay—whose grandfather started at Stafford in 1919—and his team providing a deep understanding of the unique needs and concerns of the region’s boaters. Indeed, Kay is a longtime boater himself, having sailed and fished the waters off Martha’s Vineyard and the Massachusetts Southcoast since he was 4. He currently owns a 28’ Albin powerboat and a 19’ Vineyard Gem sloop built on-island in 1962.
New England Boating recently caught up with Kay, who explained some of the benefits of choosing an agent that specializes in marine insurance.
One is that few mainstream agencies have direct contact with the underwriters who specialize in boats. “There used to be over 100 marine underwriters to choose from; now that’s down to 3 or 4 serious companies,” says Kay. “We have deep ties with the right underwriters, and we’re able to negotiate the best rate due to the volume of policies we hold.”
One of the biggest drawbacks to using a non-marine insurance company is that the policy terms can vary widely from one underwriter to another. “You could get 10 totally different policies for the same price,” Kay notes. “It’s not like a homeowner’s policy, which is very standardized. Boat insurance policies are extremely varied.”
One potential stumbling block is the “valuation clause”. In the event of a complete loss, many boaters are unaware that insurers will subtract the depreciation of the boat based upon its age and condition. In other words, they may only issue a check for the value of the boat based on the current market value listed in the so-called “BUC Book” (the marine version of the Blue Book for cars). Subsequently, many boaters end up paying too much on their policy as the boat depreciates over the years, and do not receive the replacement value they expect if their boat sinks, is stolen or catches fire in a total loss.
For example, if you paid $100K to purchase a boat 5 years ago, the insurance company is not going to give you $100K if the boat is totaled. They use the age and condition to determine the current value, and that’s the amount you might receive a check for, less your policy deductible. “Consequently, there are a lot of people who overpay on their insurance policies, or think they will receive full replacement value if something happens to their boat,” says Kay. “We advise our clients on these things, whereas many companies do not. Re-evaluate the policy every year to make sure you’re not overpaying.” On a partial loss, like a theft of electronics, most good policies provide replacement cost without depreciation. But be careful, as not all policies do. Read the fine print, or ask.
If you own a classic boat, a restored boat, or a boat with a lot of sentimental value that would take a lot of money to replace, you may need an “agreed-value” policy. With this type of policy, you and the insurance company agree on the value of the boat and what it would cost to replace in the case of a total loss.
Coverage of Engines, Equipment:
Kay recommends digging deeper into the valuation terms of your policy. Check the value assessed for partial losses on big-ticket items beyond the hull, such as electronics, the engine, the generator and the trailer. Also, be aware that the repair or replacement of sails, curtains and canvas will rarely be at replacement cost, as most companies will deduct depreciation on these items.
“Unlike a car, each part of the boat needs to be covered. You need to consider cost and depreciation on the engine, safety gear, sails, canvas—you name it,” Kay explains. “Most boaters neglect to consider the value and depreciation of expensive electronics when insuring their vessels. Some insurance companies will not pay the full cost to replace your chart plotter, radar and fishfinder. Others will.”
Another major area of concern is the contractual terms of the policy. For example, if your policy has a standard “layup warranty”, common in the Northeast, you have agreed that the boat will not be used between the dates of November 1 and April 1. If you use the boat during the layup period and have a mishap, the policy is automatically void—something to think about on those unseasonably warm days late or early in the season. “If you think you might use your boat later or earlier than the dates specified in your policy, contact your agent, as it’s usually pretty easy and inexpensive to extend the navigation period,” says Kay.
Similarly, if your boat is only insured for use in coastal waters, or a certain area of travel, you need to stay within the boundaries outlined by your policy or you risk violating the policy warranty. For example, if your coverage only extends to “coastal waters,” you will not be covered if an accident occurs beyond the 3-mile state-waters limit. On the plus side, it is very easy to get a rider or endorsement if you plan to occasionally travel beyond those limits. You can usually get something in writing (an email will suffice) within 24 hours of making the request.
Liability should also be considered when choosing your policy, says Kay, especially if you have guests on your boat. “Get the maximum amount of liability you can afford, as there’s not that big a difference in premium between a $100,000 policy and a $500,000 policy. Also, you may want to consider getting a $1 million umbrella policy via your homeowner’s insurance, which will cover you if something happens on your boat, over and above the amount you have on your boat policy.”
Racing & For-Hire Coverage
A major area of concern for sailors is racing coverage. “You definitely need to watch out if you do any sort of racing. And I’m talking about even laidback Thursday-night-after-work racing with your buddies,” says Kay. You need to make your underwriter aware of any competitive usage of your boat, so you can get a racing rider or endorsement on your policy.
Also, if you charge people to ride on your boat or pay someone to serve as mate or crewman, even for a day, you will usually void your policy. “Whenever money is changing hands, you need to be careful,” warns Kay. This applies even if you’re simply hiring someone to serve food or drinks on your boat during an onboard party.
What About the Kids?
Similarly, you should let your underwriter know if your spouse or children will be driving the boat, even when you’re onboard—and especially if you’re not. If your kids damage the boat in your absence, you may not be covered. The best plan is to list any operators on your insurance policy.
Lowering Your Premium:
Kay explains that many boaters fail to realize that their driving record can affect their boat-insurance policy, so one way to lower your premium is to avoid any motor vehicle violations. “Your driving record is very important,” says Kay. “A clean record will result in a lower premium.”
Depending on your underwriter, taking an approved safe-boating course or earning your captain’s license may also lower your premium, but only if you bring it to the attention of your agent and have all the necessary documentation.
The above are just a few bit of good advice from Jay Kay and Stafford Insurance. Be on the lookout for more tips in the coming months.