Whether you've just purchased a canoe, sailboat, cabin cruiser, sportsfishing boat, speedboat, yacht, classic, or wooden boat (among others), you need to think about the risks of owning and operating a boat, its motor, and its trailer. You need protection against loss and damage from being sunk, capsized, or stranded. You also need protection against loss from fire, collision, explosion, theft, storms, personal injury claims or property damage claims.

State law may require you to carry a minimum amount of insurance on your boat. And if you have an outstanding boat loan, your lender probably requires you to carry full insurance on the boat. Additionally, many marinas and yacht clubs won't allow you to dock your boat unless you're insured. Whether required or not, it's a good idea to have insurance on your vessel.

What kind of boats are covered?
Watercraft can be covered in a number of ways, depending on the size and type:

• Nonpowered boats--Boats, such as canoes, rowboats, and pedal boats can be insured, but for inland water use only.
• Pleasure boats 16' to 25'11" -- Boats of this size, and valued at $3,000 or more, are eligible for boatowners insurance. Navigational limits are normally imposed.
• Pleasure boats 26 feet or greater--Boats of this size, which include most cruisers, sailboats, and sportsfishing vessels, are eligible for personal yacht insurance.
• Personal watercraft--Watercraft, such as jet skis and wave runners, are eligible under specialized policies.
• Commercial boats--Commercial boats, such as fishing boats, sightseeing boats, cargo boats, and ferries, are eligible under specialized policies.

• Outboard motor and boat insurance--This is a policy that only covers physical damage. It is commonly provided under an open peril inland marine floater.
• Boatowners or watercraft package policies--This type of policy provides both liability and physical damage coverage. It typically protects your boat, motor, and boat trailer. Property covered generally includes anchors, oars, electric trolling motors, extra fuel tanks, tools, detachable canopies, seat cushions, life preservers, skis and tow ropes, dinghies, and remote controls and batteries. Property generally excluded includes portable electronic equipment, photographic equipment, fishing gear, damage caused by wear and tear, and damage caused by repair or restoration. Liability coverage pays for medical expenses up to the limits of the policy for you and other occupants of the boat, and provides protection for legal liability resulting from an accident (including bodily injury, property damage, and legal defense expenses).
• Personal yacht insurance--This type of policy is an ocean marine policy which provides physical damage and liability coverage. Sections of the policy may provide "all risk" coverage on the boat and its equipment and marine liability coverage. This type of policy generally does not have specific territorial limits. It usually has "cruising limits" defined in the policy. The larger the cruising limits, the larger the premium.

Physical damage coverage
What it covers
A boat policy typically pays to repair or replace your boat if it is damaged or destroyed by fire, lightning, hail, windstorm, hurricane, tornado, explosion, collision, capsizing, sinking, vandalism, or theft. (Covered perils may vary--make sure your policy is as comprehensive as possible.) In addition to the boat itself, outboard motors, trailers, and personal property kept aboard the boat are covered by most boat policies. The insurer typically will also pay to protect the vessel from further damage in the event of a mishap, or to recover the boat if it sinks or becomes stranded.

What it doesn't cover
Physical damage which results from any of the following is typically excluded from coverage:

How claims are paid
In the event of damage or theft, the amount of your claim payment will be determined using one of the following methods:

Your policy should state which of the above methods will be used to settle your claim. Some insurance companies automatically use an agreed value for boats under 15 years of age, and switch to the actual cash value standard for boats older than that. Certain items (such as sails and outboard motors) are almost always covered on an actual cash value basis. Given a choice, replacement cost coverage is generally most advantageous to you, and may be required by your lender (if applicable).

Liability coverage
As with auto and homeowners insurance, this is the most critical component of any watercraft insurance. The reason: liability claims against you for bodily injury and property damage can easily reach $100,000 or more, depending on the severity of the accident. If you have inadequate liability coverage (or worse yet, none at all), a sizable claim against you can put your home, savings, and other assets in jeopardy.

What it covers
Liability coverage provides protection for legal claims if you are found liable for a boating accident. It typically covers the legal and financial consequences of accidental bodily injury or death, as well as damage to other boats, docks, and personal property. Coverage is usually extended to you, your family members, and others who operate your boat with your permission. In today's litigious society, huge personal liability judgments are not unusual. Consequently, your coverage in this area should be as high as needed to shield your assets and future earnings. Liability coverage is typically available in amounts ranging from $100,000 to $1,000,000. For additional protection, consider purchasing a personal umbrella liability policy.

What it doesn't cover
Liability coverage under a boat policy generally contains a number of exclusions. The following is a list of common exclusions; however, your policy may differ:

Legal defense protection
Legal defense coverage is typically optional under a boat policy. It usually covers legal defense costs for lawsuits brought against you for damage caused by an unauthorized person operating your boat. Court costs, attorney's fees, and investigation expenses are normally covered.

Medical payments coverage
Boat policies may also include medical payments coverage, which pays for medical expenses resulting from at-fault boating accidents when someone is injured "in, upon, getting into or out of the insured watercraft." The broadest policies may also include medical payments coverage for waterskiing injuries. Medical payments coverage may or may not be necessary, depending on the scope of your health insurance coverage.

Uninsured boaters coverage
Uninsured boaters coverage is available under a boat policy as an option. It provides payment up to a specified limit--generally $10,000 per accident--when you or a member of your family suffers bodily injury caused by an uninsured boater. If the uninsured boater also has insufficient assets to compensate you for your losses, the financial consequences could be disastrous. With this possibility in mind, it's probably wise to purchase this coverage with a relatively high limit.

Limitations
Boat policies may limit usage of the insured vessel to a specified territory. The broadest policies cover the vessel while being operated on any inland body of water (rivers, lakes, etc.) within the continental United States and Canada, and coastal waters of the same areas, up to a certain limit. The most restrictive policies provide coverage only on a specified body of water and within a narrow perimeter around that area. The coverage provided by other policies falls somewhere between these two extremes. For example, some may limit coverage only to inland lakes or to certain states. Many will not provide coverage for offshore waters, such as the Gulf of Mexico.

Yacht policies
A yacht policy is very similar to a boat policy, in that it provides coverage for physical damage to your vessel and for personal liability claims against you. However, in a yacht insurance policy, these coverages are called "hull insurance" and "property and indemnity coverage." Yacht owners can also purchase several optional coverages.

Hull insurance
This coverage pays to repair or replace your vessel if it is damaged or destroyed. Typical covered perils include fire, lightning, hail, windstorm, hurricane, tornado, explosion, collision, capsizing, sinking, vandalism, and theft. However, policies vary from one insurer to another. In addition to the yacht itself, the sails, furniture, outboard motor, and machinery are also covered. Dinghies and trailers may be covered under a separate policy endorsement.

Protection and indemnity coverage
This section provides marine liability coverage in the event that a liability claim is filed against you for bodily injury and property damage resulting from an at-fault accident. This coverage may be subject to certain exclusions.

Optional coverages
Like boat insurance, yacht insurance policies typically provide optional coverage for legal defense, medical payments and uninsured boaters (see above). Yacht owners can also buy a hurricane protection endorsement, which will pay to haul your yacht out of the water if a hurricane is approaching and put it back in the water after the hurricane has passed.

Limitations
Most yacht policies include several limitations, called "warranties." A navigational warranty limits the operation of the insured vessel to a specified area. Depending on your policy, the size of the covered region could vary dramatically. Many yacht policies also include a lay-up warranty, which requires you to take your yacht out of operation for certain periods during the year. For example, a yacht policy for a vessel harbored in New England might require that vessel to be out of commission during the winter months.

Personal watercraft insurance
If you own a personal watercraft, you might actually have a difficult time insuring it. Many insurers refuse to insure these craft, because they pose a much greater risk than other types of watercraft. According to some statistics, 45 percent of all boating accidents involve personal watercraft. However, certain insurance companies now specialize in insuring personal watercraft because of their popularity. If you own a personal watercraft, make sure you purchase an insurance policy that includes bodily injury, property damage, liability, and theft coverage.

How much does boat/yacht insurance cost?
The cost depends on a number of considerations, including the age, size, type, and power of your vessel. Smaller boats are usually less expensive to insure than larger boats, and, in general, speedboats will be more expensive to insure than sailboats. Also, where and when you use your vessel will affect the cost of your insurance. For example, it's more expensive to insure a boat in coastal waters than in inland lakes and rivers, especially in areas at risk for hurricanes. Other factors that influence price include the security of the location where your vessel is normally kept, the liability limits and deductibles you have selected, your level of experience as a boater/sailor, and whether you use your boat year-round.

Discounts
Safety is of utmost importance to insurance companies, so you may find that your insurer offers a discount when you renew your boat/yacht policy after a year with no claims. Taking an approved boating safety course can also earn you a discount on your premiums. Discounts are also available for protective devices such as depth-finders, burglar alarms, and ship-to-shore radio systems. If you insure your boat with the same company that issued your auto, life, or homeowners insurance, you may be eligible for a multi-policy discount as well.

Homeowners insurance and boats
Homeowners insurance usually includes limited coverage for small watercraft. A typical homeowners policy provides $1,000 worth of coverage for physical damage that occurs while your boat is stored at your home. Homeowners insurance may also provide some personal liability coverage to protect against claims resulting from negligent operation of your boat, but the amount of this coverage is not substantial. Jet skis and other similar watercraft are often excluded from homeowners insurance coverage.

Things to ask your agent about boat insurance
Here is a brief list of some questions you may want to ask your insurance agent: