Insurance: hull coverage vs. liability only

Shopping for first "practice boat" (homing in on an older, but really nice condition, Gulfstar 43' Mk II), and having my first conversations with yacht insurance people.

I have a lot of questions, but I want to focus on the liability-related ones for this Thread:

1. What do y'all think about "liability only" for a boat with a hull value of less than $50K? It will be co-owned with another couple, so our maximum exposure from a complete loss is $25K per couple, which would hurt, for sure, but wouldn't derail the retirement train if it happened. (1/2 of the premium for the best quote we got was for liability, the other 1/2 for hull coverage: $1,100 each, for a total of $2,200.)

2. How much liability coverage is enough? I know that's VERY subjective, but I'd love to gather opinions and the reasoning behind the opinions.

Thanks!

Brian

Brian, You may think that co-owning the boat limits your liability to $25K, but what happens if the boat sinks? You will have salvage costs, possibly environmental costs, etc. that could go into the hundreds of thousands.

I'm not certain, but I doubt you could evade those costs by declaring bankruptcy, but even if you could, would you be willing to jeopardize your financial future because you wanted to save a few bucks on boat insurance? IMHO it's just not worth the risk. If you can't afford to PROPERLY insure your boat, you probably can't afford boating. That's a harsh reality, but it is a reality that should be considered.

Have you shopped around or is this the only insurance quote you have gotten?

There are ways do weasel out of blame for things like an LLC but for real, honest people, I wouldn't have less than a million dollars in liability insurance.

And if there's joint ownership, they will come after all the owners and it won't be split 50-50. Whoever has it will end up paying.

If you operate a boat, your liability could be much, much more than the cost of the boat. If heaven forbid, you hit another vessel, sink it and kill a couple of passengers, you liability could be millions.

And most marinas that permanently berth you require either a copy of your insurance policy or to be named as an additional insured under your policy. They require minimum limits of $300,000 which is pretty standard in the marine insurance industry.

We have the $300,0000 of boat liability insurance and an umbrella policy that is relatively inexpensive and extends the limit by $2 million.

Whether you also take out hull insurance is a matter of how much risk that you can stand financially. Unless you have a loan for the boat, there is no requirement for hull insurance.

David

Do a little insurance shopping, both on the internet and with a local marine insurance broker. Going through a broker saved me a substantial amount over the best policy I found myself. My policy cost about 1/3 less than the numbers you quoted for a vessel that is insured for more than double what you are talking about. Don't skimp on insurance, they are like PFD's, if something happens you can't have enough.

BrianSmith said:

Shopping for first "practice boat" (homing in on an older, but really nice condition, Gulfstar 43' Mk II), and having my first conversations with yacht insurance people.

I have a lot of questions, but I want to focus on the liability-related ones for this Thread:

1. What do y'all think about "liability only" for a boat with a hull value of less than $50K? It will be co-owned with another couple, so our maximum exposure from a complete loss is $25K per couple, which would hurt, for sure, but wouldn't derail the retirement train if it happened. (1/2 of the premium for the best quote we got was for liability, the other 1/2 for hull coverage: $1,100 each, for a total of $2,200.)

2. How much liability coverage is enough? I know that's VERY subjective, but I'd love to gather opinions and the reasoning behind the opinions.

Thanks!

Brian

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Brian. First, I'd shop the insurance market. However, don't just shop price. Find out what they are covering. Do they include salvage? What about named storms?

But then after saying that I'm finding a disturbing portion of your post and want to try to address this without sounding rude. I'm bothered that you're already looking for short cuts. Not having comprehensive insurance including hull coverage. How little liability. Compared to just the initial work you'll need to do on a $50,000 boat to get it ready and the annual maintenance on one, this is just a small part.

As others have said, just because the value of the boat is $50,000 and you're only half owner, doesn't mean you're limited to $25,000 exposure. The cost of salvaging the boat and cleaning any environmental damage could be several times that and salvage is part of the hull coverage, not the liability coverage.

As to liability, what kind of liability do you have on cars? Plane? What has your attorney advised you to have? I'd recommend as someone else did $300,000 minimum with an umbrella for a couple million. But the umbrella should be part of your whole insurance plan.

I can only say I wouldn't short cut insurance. Now one thing I would say is look at the deductible. I do believe in fairly large deductibles if one can afford the loss. But even there in a partnership situation you run risks. What if you got a $5,000 deductible but your partner wasn't prepared to pay his $2500 portion right then?

What is the age of the boat? That does impact insurability and cost greatly.

Now someone mentioned LLC's in a rather harsh way as weaseling out of blame. I can say without question if I was buying a boat in a partnership situation I'd want an LLC. You're not just talking about your own causes but those of another. And, I don't think it's fair to describe LLC's as weaseling out of blame. They are a means of protecting against some of the extreme litigation that one can face. In this case, let's say his partner runs into another boat causing the loss of a life. The suit could easily be $20 million and as co-owner of the boat he would be fully liable. A million dollars of liability coverage can come up way short.

LLC's also provide limited protection against one's actions and accountability. If I'm out operating a boat that is owned by my LLC, I can still be held accountable for my personal actions as operator.

I wish it wasn't necessary to put certain things into LLC's or Corporations. But to imply that one who does is dishonest isn't appropriate. And again in any co-ownership I absolutely would. It's going to require a partnership anyway so why wouldn't one go LLC?

Ultimately the insuring of a boat should fit in with your entire insurance profile. But under insuring especially when in a partnership could be very dangerous.

I think that, like many things related to this, you have to weight the risks you are going to take. Insurance can't cover everything. If it did, it would be extremely expensive. On the other hand, a small-ish boat like ours can only do a limited amount of damage if operated properly and competently.

Ok, sure, watch someone come up with an example that was either based on real life (ie: rare) or a hypothetical to try and debunk this. In 3...2...1... ;-) But the truth is this: I would be hard pressed to even be NEAR a boat that is expensive enough and where I was operating Skinny Dippin' in such a way where I could even DO a million dollars in damage. Moreover, this area isn't like others (eg: South Florida) where just the sheer volume of boats on the water create a greater risk. So, therefore, we opted for more minimal coverage. That's the risk we are willing to take, and we're good with that.

Tom.B said:

I think that, like many things related to this, you have to weight the risks you are going to take. Insurance can't cover everything. If it did, it would be extremely expensive. On the other hand, a small-ish boat like ours can only do a limited amount of damage if operated properly and competently.

Ok, sure, watch someone come up with an example that was either based on real life (ie: rare) or a hypothetical to try and debunk this. In 3...2...1... ;-) But the truth is this: I would be hard pressed to even be NEAR a boat that is expensive enough and where I was operating Skinny Dippin' in such a way where I could even DO a million dollars in damage. Moreover, this area isn't like others (eg: South Florida) where just the sheer volume of boats on the water create a greater risk. So, therefore, we opted for more minimal coverage. That's the risk we are willing to take, and we're good with that.

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How much damage is a life? You're fully capable of a tragic mistake. Jet skier, water skier? Small boat? So there is your hypothetical. And not necessarily on the other boat. What if someone does something completely stupid on your boat and ends up in the water and drowns? I'm sorry but these aren't hypothetical. These things happen in real life.

But the other side of that is that beyond $300,000 or so liability, additional coverage in the form of an umbrella isn't that expensive. That's because the odds of something like that happening are very slim. But if it does it is devastating. Now, what you get is your choice, but bad things can happen to very good people.

And NC, since that is where you are, averages around 24 boating deaths per year.

BandB said:

And NC, since that is where you are, averages around 24 boating deaths per year.

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That's a pretty small number. Does that include inland creeks, ponds, lakes, and rivers? I'd also wager that the VAST majority of those are in skiffs, bay boats, canoes, that are small, faster, and way more dangerous than a 35' trawler going 7 mph in the ICW. Like I said... balance.

You have to admit that trawlers are pretty safe boats on inland waterways.

BandB said:

How much damage is a life? You're fully capable of a tragic mistake. Jet skier, water skier? Small boat? So there is your hypothetical. And not necessarily on the other boat. What if someone does something completely stupid on your boat and ends up in the water and drowns? I'm sorry but these aren't hypothetical. These things happen in real life.

But the other side of that is that beyond $300,000 or so liability, additional coverage in the form of an umbrella isn't that expensive. That's because the odds of something like that happening are very slim. But if it does it is devastating. Now, what you get is your choice, but bad things can happen to very good people.

And NC, since that is where you are, averages around 24 boating deaths per year.

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That's the point entirely. I have $500K plus a one million umbrella policy. Juries are pretty liberal with other people's money, at least in the USA.

If you have nothing, you have nothing to lose. If you have a nice home, savings, retirement, etc. you really should carry enough insurance that you don't end up living the rest of your life in a cardboard box under a bridge.

The OP asked two questions: if liability only policy is wise for a sub $50K hull, and if so, how much liability would be enough.
My answer to first question is yes, and the answer to the second question depends on the financial position of the owners. If neither couple has much in the way of assets, you have less to fear from a lawsuit and less need for higher limits. Why? Because no attorney will take the time to sue two couples who have no reachable assets as the attorney will not get paid. In that instance, any party damaged by your boating will from a practical standpoint be stuck with your policy limits.
Our marina requires a minimum of $300K in liability. Check with marinas in your area, take a look at what you have to lose if things go wrong, and insure appropriately.
As was mentioned above, your liability is not generally limited to the 50% ownership. Let us imagine you and your wife have assets and the other couple does not. "Joint and several liability" will enable a potential plaintiff to have a go at you for the entire damages in excess of the policy limits even if you were not on the boat when the harm occurred. Choose your co-owners wisely as well.

Tom.B said:

That's a pretty small number. Does that include inland creeks, ponds, lakes, and rivers? I'd also wager that the VAST majority of those are in skiffs, bay boats, canoes, that are small, faster, and way more dangerous than a 35' trawler going 7 mph in the ICW. Like I said... balance.

You have to admit that trawlers are pretty safe boats on inland waterways.

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Actually the majority of them are on lakes. 195 boats involved in accidents out of 300,000 registered so chances of an accident are 1 in 1,500 boats or so. In 2012, 2 accidents in Craven County, no fatalities. Beaufort had 4 accidents, one fatality.

Odds of a fatal accident are obviously very low. Not quite as bad as the odds for winning the lottery though.

MVNoPlans said:

The OP asked two questions: if liability only policy is wise for a sub $50K hull, and if so, how much liability would be enough.
My answer to first question is yes, .

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The issue raised with liability only is salvage costs. The fact that a $50k hull can also include a $50k or $100k salvage bill.

I agree that liability only is probably the way to go. Figure even with a small boat you should go for at least $500K liability. Regarding the boat itself, insurance cost is related to hull value. My $500K hull premium with $2M liability (after Superstorm Sandy rate increase!!) now costs $3K/year. So figure you should be able to get decent hull/liability coverage on a $50K vessel with a deductible for $500/year total. Just need to shop the rates. We are insured with Ace Insurance - pretty big insurer.

Call Al Golden at IMIS. You need to discuss marine insurance with a marine insurance broker. He deals with 3xA rated companies you will never find yourself.

Lots of good in this thread.

Multiple ownership scenarios (non related owners) bring a huge dynamic to boat ownership. To answer the OP's question - self insuring for the hull value and carrying liability only is a viable option. Bear in mind that when you carry hull coverage, wreck removal coverage is generally included, equal to the hull value of the boat. Liab only coverage usually won't cover wreck removal coverage.

Salvage coverage (the act of safeguarding a vessel that is recoverable) is generally not included in liability only policies. Oil pollution liability may or may not be included n liability only policies.

A general liability umbrella will usually cover you for some property liability, but not for pollution or wreck removal.

As far as how much coverage is enough- that is a question that must be answered by the OP based on his risk tolerance and asset base.

As always, take the time to read the policy to see what exactly is (and is not) covered.

You and your partners should have the boat liability coverage at $1 million. Your personal liability umbrella should equal your net worth rounded up to the next million. Nothing less. Period.

Tom.B said:

On the other hand, a small-ish boat like ours can only do a limited amount of damage if operated properly and competently.

But the truth is this: I would be hard pressed to even be NEAR a boat that is expensive enough and where I was operating Skinny Dippin' in such a way where I could even DO a million dollars in damage. So, therefore, we opted for more minimal coverage. That's the risk we are willing to take, and we're good with that.

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One thing you might consider is your liability exposure if your boat broke loose from it's mooring or dock and caused damage to marina equipment or other boats. Cause may be due to storm or vandalism.
Regardless of your competence as a boat operator there are some conditions like the sudden loss of the engine, that can put you in a very serious liability situation.

The owner of a 40+ new Sea Ray probably has the ability to out lawyer you even if you think you're right.

The real liability is personal injury and you don't have to have a big boat to injure or kill someone. Take a buddy out in your runabout and he falls out and gets his arm or leg cut off by the propeller. Who do you think is going to provide for him and his family for the rest of their lives? That's right, you are. Better have good insurance or he'll be living in your home and driving your car.

Tom.B said:

Ok, sure, watch someone come up with ... a hypothetical to try and debunk this. In 3...2...1... ;-)

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I hate being right all the time ;-)

Hmm. Our insurance company will not give us environmental coverage without also hull insurance and periodic surveys.

Tom.B said:

I hate being right all the time ;-)

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Well I'm glad I could provide you some amusement this morning.

The fact is, things like this can and do happen and that is why we buy liability insurance.

I also buy uninsured motorist and uninsured boater insurance just to protect myself against people who don't think they will ever have an accident so they don't need insurance.

If I read that right, liability only for $2200 a year......that seems a might bit high...?

Recommend shopping around a bit........

I think you have recieved plenty of good insurance information, I would add a partnership agreement of who is liable during operation, I know when things are great nothing seems like an issue until something unthinkable comes along, play out all the what if's now. Personnally I would never partner with anyone, buy a smaller/older $25k boat (plenty on the market now) and go from there, just my 2 cents.

Will said:

If I read that right, liability only for $2200 a year......that seems a might bit high...?

Recommend shopping around a bit........

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Agreed and agreed! Markel American, as an example offers the following:

$300k for $500
$500k for $750
$1M for $1000

Not an insurance professional but as I stated earlier in this thread, we have comprehensive coverage for the hull and liability for $3K for $500K hull though a reputable insurer. I was previously quoted $14K for similar coverage when we first purchased our trawler - that was from West Marine!! I do not feel any less protected and am saving lots of cash by not using WM!! I think you need to shop around more aggressively.

Chrisjs said:

Not an insurance professional but as I stated earlier in this thread, we have comprehensive coverage for the hull and liability for $3K for $500K hull though a reputable insurer. I was previously quoted $14K for similar coverage when we first purchased our trawler - that was from West Marine!! I do not feel any less protected and am saving lots of cash by not using WM!! I think you need to shop around more aggressively.

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West Marine is selling insurance now?

Yes, for many years. I only buy additional TowBoat US insurance from them though!!

Something to look at if you are buying an umbrella policy AND plan to go outside of the US. Some umbrella policies are not world wide for boating, some cover worldwide but only if the injured party sues in the US. Thus if you plan to go to Mexico, the Bahamas or Canada make sure the umbrella policy covers the boat outside of the US and does not have any limitations as to where the claim is made or brought.

I have had serious trouble getting umbrella policies to cover Bay Pelican outside of the the US.