Do I Need Boat Insurance?

A few states require that you have liability coverage on certain types of boats — powerboats with more than 50 horsepower or personal watercrafts (PWCs), for example — or on boats used in state parks or kept in state-run marinas. To find out if you are legally required to have insurance on your boat, search online for state and "boat insurance requirements."

Even if your state does not require you to carry boat insurance, your bank will if you have a loan on the boat, and your marina might. You won't be able to get a loan on your boat without providing the bank with proof of insurance that covers the full value of the boat in the event of a loss. The bank gets listed as the lien holder on the policy so that if any loss payments are made it will be listed as a co-payee on the check. Most marinas require proof of liability insurance before it will accept a contract for a slip or a mooring, and some will want to be listed as an additional insured on the policy.

If your state, bank, or marina requires you to carry boat insurance, your homeowner's policy will generally not be acceptable. That's because homeowner's policies are usually limited to boats under a certain size or value, and they don't have the necessary provisions to cover the types of losses that may occur with a boat. Boat insurance is designed to address the specific needs of boaters. Policies out in the market give you the option to insure the boat for its current market value in the event of a total loss — often called Actual Cash Value (ACV) — or for an "agreed value," also known as "stated value."

Most boat policies are "all risk" policies, which provide coverage for a broad array of calamities that could befall your boat, including theft, vandalism, lightning, fire, grounding or sinking, and lost or stolen belongings. Look for options that will protect your personal items such as watersports equipment and fishing gear, as well as provide towing coverage in the unfortunate event of a breakdown or soft grounding. Many companies also give you the option for a policy that does not insure physical damage to your boat at all, but only provides a specified amount of coverage for your liability to others in the event of an accident or protection from uninsured boaters.

The more your boat is worth, the more important insurance becomes to protect yourself from financial loss. If you have an umbrella policy, it will require your boat policy to have certain limits; make sure there is no coverage gap. Many umbrella or excess liability policies require the underlying policy (such as your boat policy) have liability limits of at least $300,000 to $500,000.

Even if you are not otherwise required to have insurance and your boat is not worth very much, you should still consider insuring it. A collision with a small powerboat can cause serious injuries, and even if you are not found liable for those injuries, you could end up spending a significant amount of money in legal fees to defend yourself. Policies that cover liability only are not that expensive. At the very least, get a quote on several different policies so you can make an informed decision based on the coverages versus the cost.