The Insurance Gamble
When you wade into the quagmire, its easy to get stuck.
For some sailors, an all-chain rode and an oversized anchor may be considered the best insurance, but for most boat owners, purchasing a conventional boat insurance policy is the most common way to safeguard their investment. A requirement of most lending institutions and many marinas, boat insurance is a topic that can quickly become a tangled maze of deductibles and premiums based on an extensive set of variables that include past sailing experience, boat age and condition, geographic location, and intended sailing grounds, as well as liability, and medical coverage. To cut through this morass and get a firm grasp on the topic, PS sought quotes from numerous marine insurance agencies around the nation using a sample boat. Here’s our report, which compares values, premiums, and customer service across the board.
Because insurance coverage varies greatly from region to region, we’ve divided the review into two parts. In this issue, we take a look at insurers in the Great Lakes, South Florida, and New England. Seattle and California will be reviewed in the May issue.
As a test boat for this exercise, PS chose a 1994 Catalina 36 mkII, a model that was introduced that same year. Company president Gerry Douglas described this boat as a vessel targeted to couples and families who primarily weekend and vacation-cruise, but who may also be preparing for some extended cruising. The 1995 version of the boat sold for $97,000. The most recent listing for a 1994 model (according to the 2005 BUC) is between $58,200 and $63,900.
PS solicited quotes for this boat from different companies operating in different geographic locations. We didn’t reveal to them that these quotes would be used for comparative purposes in an article. We sought to insure the boat for $80,000 actual cash value, presuming that the electronics and additional equipment onboard increased the boat’s value. Actual cash value policies pay for replacement costs less depreciation at the time of the loss. In the event of a total loss, used boat pricing guides and other resources are used to determine the approximate market value of your vessel. A partial loss is settled by taking the total cost of the repair less a percentage for depreciation.
Agreed amount value policies mean you and the insurance company have agreed on the value of your vessel, and in the event of a total loss, you will be paid that amount. Agreed amount value policies also replace old items with new in the event of a partial loss without any deduction for depreciation. Most agreed amount value policies require actual cash value on certain damaged property such as sails, protective covers, batteries, dinghies, trailers, aged outboard motors, and so on. (Coverage of these items varies from company to company, and you would need to review your policy for specific information.)
To each agent, PS stipulated a 2 percent deductible, or $1,600, and $2,500 for personal effects. For medical insurance, we requested $5,000 worth of coverage, and for liability coverage, we asked for $100,000. We also specified that we—the owner—had 20 years of sailing experience, but didn’t hold a captain’s license or any certificate from a sailing or boat handling program. We stated that the boat included an inboard, four-cylinder diesel engine. The sails, we said, were original, but in reasonable condition. There were manual fire extinguishers onboard, but no CO detectors or other fume detectors, and the boat had a float-operated bilge pump. The electronics we described as “basic,” and we told the insurance agents that we didn’t need coverage for the dinghy or its engine.
Except for the quote we received for our Boston location, we claimed that the boat stays in the water and is used year-round. In Boston, we stipulated that it is hauled for seven months each year and stowed on land. We also claimed to have purchased the boat in 2003, but told the agents that we hadn’t procured insurance for it yet. We also said that we had filed no claims on boats we’d owned before. We said that we’d previously owned a Cal 25 for 10 years.
As we obtained these quotes, we paid close attention to the customer service of each agent or company. Customer service can be an important reflection of how a company operates. If that aspect of the interaction is balky from the outset, consumers should be wary. Here’s our round-up of insurance quotes and details regarding each from three regions of the country.
To get a sense of premiums for policies in this region, we submitted a quote request to National Marine Underwriters, which responded promptly. Their quote offered $80,000 replacement cost coverage for the boat and equipment, with an $800 deductible and $300,000 for liability. Coverage for personal effects was set at $500 with a $50 deductible, and medical coverage was set at $2,500. The premium for this policy would be $848.
We then contacted BoatU.S. for a quote and were initially impressed to receive a proposed policy via phone the next day. The policy set the navigation limits as the “Great Lakes and Tributaries,” offering $500,000 coverage in fuel and spill liability and $5,000 in medical payments. We were also offered $1,000 for boat trailer coverage, which we hadn’t requested.
Under this policy, personal effects coverage was listed at zero, despite our request for $2,500. A follow-up phone call revealed that if the boat had been previously insured, the specifics of our prescribed quote could have been met, but because this was the first time the boat was to be insured, the quote (and all other BoatU.S. quotes we recieved for this story) would only cover liability. BoatU.S. set a limit of $25,000 for uninsured boater coverage for each incident. The annual premium would be $389, which includes $14 for the required BoatU.S. membership.
This region is a prime example of how certain factors—geography, boat type, and location density in particular—can influence marine insurance premiums. “Comparing a location elsewhere on the east coast against Florida by insurance premiums, the cost will be 50 percent higher in Florida,” said broker Al Golden, who founded International Marine Insurance Services (IMIS) in 1987. “It’s not as simple as an historical analysis of where hurricanes hit and how often, but rather one that analyzes the accumulation of risk,” he explained. “The least expensive place to insure a boat in Florida would be on the west coast. Premiums increase on the east coast of Florida, and south of Stuart, where the numbers of huge yachts increase, the premiums will be the most expensive. We’re not anticipating any spike in premiums based on this year‘s hurricane season. Frankly, there are people who anticipate these things, and theoretically the rates should already be there. What we may see are some types of coverage being dropped. We see a lot of wind damage from canvas left on board or electronics left outside that could be excluded in named tropical windstorms in the future.”
Before conducting that interview, PS contacted IMIS through the agency’s website, and our request was apparently lost in the shuffle. After two follow-up e-mails that we sent six and eight days later, we received a reply asking for more information. That same communication offered assurances that a quote would be forthcoming once the company received the additional information. We provided answers that day, but still had not received a quote a week later. So, we waited a few more days and then called the general manager.
We received a quote the following morning offering coverage through Zurich Marine Specialty, which provided us quotes for 1 percent, 2 percent, and 3 percent deductibles based on an $80,000 hull value, and included $100,000 for liability, $2,500 for personal effects, $10,000 for medical, and $100,000 for uninsured watercraft, as well as $500 for towing. The premiums for those 1 percent, 2 percent, and 3 percent deductibles were $2,113, $1,917, and $1,819, respectively.
In the e-mail communication, our contact told us that pollution coverage is included at no extra charge, but it didn’t appear anywhere on the quote itself. Were we to buy this policy, we’d want to see that provision in writing.
According to a quote page on its website, National Marine Underwriters does not insure vessels in this geographic area. A follow-up call confirmed that the company recently stopped offering coverage here. So, we turned to Blue Water Insurance and requested a quote for our south Florida location. We got a response two days later in which the agent asked for our mailing address and whether or not we’d filed for any marine losses in the past. We replied that same day, but six days later we hadn’t received a response. Maybe we’d exhausted the goodwill of this company with too many quote requests for Catalina 36 mkIIs.
Then, we contacted Offshore Risk about a quote for this region, and heard nothing. So, we sent two follow-up e-mails five and seven days later, and on the eighth day, we got some results. The underwriter would be Markel, offering coverage for $100,000 worth of liability and $2,500 for personal effects. That quote would also provide $10,000 in medical coverage, $100,000 in uninsured boater expenses, $500,000 in pollution, $1,000 rental reimbursement, as well as $750 in towing and emergency expenses. The total premium would be $1,619.
They sent us a second quote the next day. The full parameters we requested were met with a premium of $1,844.51. The navigation limits associated with these quotes were stipulated as “Florida Coastal, not exceeding 150 miles offshore.” And the deductibles would be doubled in the case of claims filed associated with named storms.
After PS contacted BoatU.S. online requesting a quote for this region, the organization followed through promptly. We were offered a policy that would provide $100,000 in coverage for boating liability, $500,000 for fuel and other spill liability, $1,000 for medical payments, and $100,000 for uninsured boater protection. The premium for this policy came to $444 for a BoatU.S. member, or $458 for non-members. BoatU.S. offers additional medical coverage at the rate of $5 for each $1,000, up to $10,000.
The organization wouldn’t write a policy that would cover the replacement costs of the boat because our test boat had no previous insurance history. A representative later explained on the phone that we would be eligible for full coverage if we remained claim-free for one year.
To obtain a quote for a Catalina 36 mkII kept in this region, PS first checked National Marine Underwriters’ website. Surprisingly, the website application rejected our first try, but we simply filled out the online form again and it went through. The quote came back offering the deductible and the coverage we specified in our initial scenario, with an annual premium of $887. The dedectible for theft or catastrophe met our $1,600 limit.
Six days later, we received a quote from IMIS, along with an apology for being late. IMIS worked up a quote underwritten by the U.S. insurer American Modern Home Insurance Co., attaching a nicely detailed, seven-page PDF file outlining the policy. The policy offered liability coverage up to $300,000, medical payments up to $2,500, emergency towing for $100, uninsured watercraft up to $300,000, and oil or fuel cleanup for $300,000. The navigation limits were set at 75 miles offshore from Maine to Virginia with less than 30 days to be spent in Chesapeake Bay. The premium was $1,063.
IMIS also offered a quote using a different insurance underwriter, the New Hampshire Insurance Co., which is a highly rated insurer. Accompanying this quote was an eight-page PDF file outlining the terms and conditions of the policy. That policy specified a winter lay-up from Nov. 1 to April 1, as well as navigation limits defined as North Atlantic Coastal, with seven months of navigation covering the coastal waters of the Atlantic from Eastport, Maine, to Provincetown, Mass. The fine print revealed that since the vessel was 10 years old, a survey would have to be done, unless there had been one conducted by an accredited surveyor within the last three years. The total premium for that policy was $640. PS was impressed that IMIS took the time to offer multiple quotes without being asked.
We also got a quote from BoatU.S. for this region. In that policy, boating liability was set at $100,000, with fuel and other spill liability covered up to $5,000. Medical payments would be reimbursed up to $5,000, and the uninsured boat protection limit for each accident was $25,000. The annual premium came to $536 which includes $14 for BoatU.S. membership.
Offshore Risk Management provided a quote 18 days after our initial request. The company offered $100,000 in liability coverage and $2,500 to cover personal property with a $1,210 premium and $1,600 deductible. The quote included $5,000 in medical coverage, $25,000 in uninsured boat protection, and a $500 reimbursement for emergency towing.
We also requested a quote for New England from Blue Water Insurance, but despite a follow up e-mail we sent a week later, we never received a response.
PS found that many of the companies we contacted weren’t concerned about getting back to us promptly. Regarding these delays, we were offered justifications that ranged from hurricane-induced problems to short-staff situations caused by boat shows, but agents assured us that a week’s turn-around time is standard in the industry.
In many cases, our attempt to keep these comparisons consistent went awry when companies specified deductibles and policy limits that were different than those we had requested. Nonetheless, it’s informative to know that the quotes we received varied from a low of $389 (BoatU.S.) for liability coverage in the Great Lakes region to a high of $1,844 (Offshore Risk Management) for coverage in South Florida. That disparity is perhaps to be expected given the very active hurricane season last year.
However, there is definitely a broad range of policy values available when you consider that quotes for the same boat can vary almost $500 in the same region. (For the Great Lakes, BoatU.S. quoted $389, which didn’t cover replacement costs nor personal effects, while National Marine Underwriters quoted $848 for a more comprehensive policy.)
Our experience with Blue Water Insurance was that the company offered timely quotes, but not as consistently as we would have liked from region to region. The quotes from IMIS were accompanied by important details regarding this company’s policies, but again, not on a consistent basis. The premiums quoted by National Marine Underwriters seemed competetive. So, the lesson here is to thoroughly research the alternatives in your area once you’ve gotten the basic information.
If quick consistent service is what you expect, BoatU.S. seems to be the best alternative among these companies, but not all boats will immediately qualify for full coverage. In our case, the organization did respond with some quotes that covered only liability. And often the correspondence we recieved from BoatU.S. was sketchy, but this was the only company that offered us a quote on one day, a follow-up call the next, and an e-mail to boot. Because of its more consistently available customer service, and timely quotes, this organization will be an attractive choice for many. But beware that older boats can pose a problem. BoatU.S. declined to offer coverage for a 1964 Chris Craft sloop owned by a PS contributor.
In the end, marine insurance is far from being a one-size-fits-all affair. Even if the boat you own is similar in size and vintage to our test model, you can anticipate differing policy terms and premiums because of the variety of factors taken into account. And, there really are no shortcuts. The best deals in marine insurance remain a moving target; they can be determined only by first-hand research and comparative shopping.
Also With This Article
"Marine Insurance from an Underwriter’s Perspective"
"Value Guide: Great Lakes Marine Insurance"
"Value Guide: South Florida Marine Insurance"
"Value Guide: New England Marine Insurance"
• Blue Water Insurance, 800/866-8906, www.bluewaterins.com
• BOATUS, 800/283-2883, www.boatus.com
• National Marine Underwriters Inc., 800/262-8467, www.nmu.com
• Offshore Risk Management, 800/773-0105, www.offshorerisk.com
• International Marine Insurance Services, 410/827-3757, www.imiscorp.net