Insurance or not?

[Seevee]

After being involved in a few discussions regarding insurance and ending up hijacking other threads, I've posted this thread for discussion of the merits and benefits of insurance products.

Before I get the reputation of hating insurance, it's not quite the position I take. I could argue that "generally" one will loose money on insurance... it's not an investment. It's just a risk vs benefit decision.

As far as liability, I'd suspect that most of the members consider it mandatory for their operation, and considering the low cost and the potential large losses it can make sense. However, not always. And there's an argument to first deal with liability issues is to operate responsible and prudent to avoid any responsibility.

As far as hull, I could argue that there's a much larger percentage that don't have hull insurance, and in a lot of cases, it's jus not cost effective. And how much would the premium have to be to say no?

I could argue that there's a LOT of folks that are over insured and just paying too much for little benefit.

For the most part, I self insure toys. The premium isn't worth the protection. I kind of use .5 to 2% of value as a threshold... so if a $100K boat had a $1000 a year premium, that might be a limit. I'd up that if: the boat were used in a higher risk situation.... inexperience crew, a lot more usage or in unfamiliar waters or operations. OR, the boat were in a partnership where one insists on it. I fit into both categories now, and do have policies on both boats.

I've said it before..... if one is an average boater with average skills and has the average claims, they are better off uninsured, strictly from a numbers approach.

One can really get a good idea of where the risk lies. A good start is with the NTSB boating accident statistics:

Accident Statistic

One can study the above and figure out where they stand, and there's a number of little things that can be done to dramatically reduce risk.

Thoughts?

[Sealife]

Depends if you can "afford" the loss. If a $250k boat is a toy and a tiny percentage of your total assests, sure. But if you have dumped your life savings into a floating home to travel in retirement, no.

[Drake]

As to liability insurance, in the areas we cruise it's mandatory, since lots of marinas require it.

Paul

[what_barnacles]

so if a hurricane sinks your boat and the fuel and oil leak all over tampa bay, you wont like the clean up costs the epa will hit you with.

[smitty477]

The liability portion is the bare minimum that can easily be combined with a good umbrella policy.
Your skills are not important if someone slips and falls on your boat at any marina or raft up with or without your permission.
We had this happen to a vey close friend where their daughter slipped and ripped open her knee area which was then involved with surgery and follow on skin drafts for the next 3 years. The amounts were really stupendous and thankfully the other boater was insured.
And in our area of the NE you will need to show proof of insurance at many marinas as well.

[ksanders]

Originally Posted by Sealife

Depends if you can "afford" the loss. If a $250k boat is a toy and a tiny percentage of your total assests, sure. But if you have dumped your life savings into a floating home to travel in retirement, no.

Exactly!

To many of us, our boats are the largest, or second largest prchase we will make in our lifetimes.

It's pretty hard to assume the risk at that level.

[Seevee]

Originally Posted by Sealife

Depends if you can "afford" the loss. If a $250k boat is a toy and a tiny percentage of your total assests, sure. But if you have dumped your life savings into a floating home to travel in retirement, no.

True, however, if we lived long enough it would be cheaper to self insure, but realize that won't happen. But, if the premium were high enough, perhaps $5K a year for a boat like that, there would be a strong argument to just save the dollars and put them toward safety items and training. or get a cheaper boat where you could afford the loss.

However the chance of a loss for most of us is extremely small.

[Shrew]

I would say that it's fair to at least differentiate between Liability Insurance and Comprehensive Insurance. The concept of a 'toy' (Inferring a recreational/entertainment purpose as opposed to business or a residence) only applies to how it is used and not completely relevant here.

Fro a Liability Insurance perspective, you can't expect a marina to take one at their word that they're self-insured and 'good for it'.

For arguments sake, let's assume that there are no 3rd parties mandated insurance (e.g. lien holders, marina's, etc).

I would encourage people to ask themselves simple questions.

1) Can I afford to repair the damages I incur on other people's property (This includes EPA clean-up)?

2) Can I afford to repair or replace my own vessel?

3) Will a catastrophic event end my lifestyle?

You can mitigate risk, but you can't prevent it. There are variables outside of your control.

If your boat is sunk by an uninsured vessel, can you replace your own assets? Boat drags into another boat, or onto rocks/shore? Storms?

Some things are simply out of our control. The example of the 100K boat and the 1K premiums still means it would take 100 years to break even.

Own the boat for 15 years. Loose the boat. Would one be happier in that situation knowing that they saved 15K or that they lost 100K? I couldn't handle the hit. So I throw my money into a pot with everyone else and we mutually assume financial liability. I hope I'm not the person that draws from the pot, but I'm glad the pot is there if I need too.

[dhays]

Seevee, I think you basically have the right idea. Insurance should be looked at carefully. Any insurance, by design, should be a net loss us. We hope and pray that we never have to use the insurance, hence we hope and pray that our premiums will never be returned as insurance payments.

As others have said, the purpose of insurance is to insure us against losses that we either can't, or are unwilling, to absorb ourselves. This holds true for any type of insurance.

For my boat, I need hull insurance. Part of the reason is that I have a loan on the boat and therefore it is required. Even if I owned it outright, I would insure it because it would be financially difficult to replace the boat if disaster struck.

For liability, I can't afford a liability claim in the millions of dollars. I insure against it. I also feel there is a moral obligation to carry liability insurance. Some make the argument that if they don't have assets, they don't need liability insurance. However, that doesn't help the person who's boat you just destroyed in an epic docking fail for example.

[Sealife]

There is also the issue of financing. Most lenders will require coverage as well.

[Lepke]

I started working on the water when many commercial vessels were wood. Most had liability but not replacement value. Many that had replacement had it at a value much lower than replacement costs. This included tugs, commercial fishing and barges. All of it before the EPA ran wild. I never had a marine accident or claim.
When I became a private boat owner, I ran w/o insurance for a long time. But I had been operating boats since an early age. When I bought my first commercial fishing boat I bought full insurance for a year, then liability, and later none. A wood fishing boat fishing offshore had rates of about 10% of the value per year 40 years ago. Before accidentally spilling any amount of fuel or oil was a capital crime.
Wood tugs and barges, because of the weight involved and the damage I could do, were always insured for liability.
Now I have at least liability because of the oil spill issue. A simple oil spill cleanup can be a million. I think insurance is out of control. But that is partly our fault. Many expect full cost coverage regardless of fault or shoddy owner wiring, construction or repairs. Even those that abandon their boats instead of moving them in advance of a hurricane. Maybe if collectively we took more responsibility rates would be lower.
When there's a storm warning I dodge it, and I've dodged hurricanes and typhoons. A tsunami warning I go to sea or far up river. I don't get in docking situations where wind, weather or current could take control. But I pay high insurance rates to cover the ******** and fools that do.

[smitty477]

Originally Posted by Sealife

Depends if you can "afford" the loss. If a $250k boat is a toy and a tiny percentage of your total assests, sure. But if you have dumped your life savings into a floating home to travel in retirement, no.

But you are not just limited to the loss of the boat - you can be liable for 100X the value of the boat for spills and accidents that are not easily predicted or avoided.

[john61ct]

Can't get blood from a stone.

I suppose one day it will be illegal to sail poor, but in the meantime. . .

[rwidman]

Originally Posted by Seevee

.................... however, if we lived long enough it would be cheaper to self insure,..........

The term "self insure" really means "too cheap to buy insurance". I agree with you that some assets are not worth buy in insurance on but in most cases, these are covered by our homeowners insurance.

Regardless, you are taking a really big risk if you own a boat and don't have liability insurance on it. Lots of things can happen and most of us would be wiped out if we were held responsible for a death or amputation or burning a marina down.

I don't want to have to join the homeless people living under the bridge.

[Seevee]

Originally Posted by smitty477

The liability portion is the bare minimum that can easily be combined with a good umbrella policy.
Your skills are not important if someone slips and falls on your boat at any marina or raft up with or without your permission.
We had this happen to a vey close friend where their daughter slipped and ripped open her knee area which was then involved with surgery and follow on skin drafts for the next 3 years. The amounts were really stupendous and thankfully the other boater was insured.
And in our area of the NE you will need to show proof of insurance at many marinas as well.

Smitty,

I could argue that a slip and fall is NOT the boat owners fault. It doesn't meet the negligence test. Sometimes we need to take responsibility for our own actions. I feel sorry for the daughter, but slipping on a boat is not an unusual hazard, and if she were experience on boats, she'd know that.

[Seevee]

Originally Posted by WesK

The term "self insure" really means "too cheap to buy insurance". I agree with you that some assets are not worth buy in insurance on but in most cases, these are covered by our homeowners insurance.

Regardless, you are taking a really big risk if you own a boat and don't have liability insurance on it. Lots of things can happen and most of us would be wiped out if we were held responsible for a death or amputation or burning a marina down.

I don't want to have to join the homeless people living under the bridge.

WesK,


When you say "big risk", that could be hard to define. If your talking about chances, it's really small. And if you're talking damages, it's often quite small, too. You can always show exceptions, but face it, the average boater will not be in a boating accident for many lifetimes. So, be a bit above average, and conduct yourself to avoid the marina fire or killing someone. That's just not hard to do.

I would think the FIRST line of defense is to operate to maximize your safe operation.

We can agree to disagree on the insurance and if it's good advise to have it or not... just different opinions. I'm with doing what makes the best rick benefit. And, that doesn't mean going bear. I'm fully covered with two boats for now because it IS a good risk/benefit. But there have been times that I've operated without any insurance, as have a lot of other members here.

[Seevee]

Originally Posted by Lepke

I started working on the water when many commercial vessels were wood. Most had liability but not replacement value. Many that had replacement had it at a value much lower than replacement costs. This included tugs, commercial fishing and barges. All of it before the EPA ran wild. I never had a marine accident or claim.
When I became a private boat owner, I ran w/o insurance for a long time. But I had been operating boats since an early age. When I bought my first commercial fishing boat I bought full insurance for a year, then liability, and later none. A wood fishing boat fishing offshore had rates of about 10% of the value per year 40 years ago. Before accidentally spilling any amount of fuel or oil was a capital crime.
Wood tugs and barges, because of the weight involved and the damage I could do, were always insured for liability.
Now I have at least liability because of the oil spill issue. A simple oil spill cleanup can be a million. I think insurance is out of control. But that is partly our fault. Many expect full cost coverage regardless of fault or shoddy owner wiring, construction or repairs. Even those that abandon their boats instead of moving them in advance of a hurricane. Maybe if collectively we took more responsibility rates would be lower.
When there's a storm warning I dodge it, and I've dodged hurricanes and typhoons. A tsunami warning I go to sea or far up river. I don't get in docking situations where wind, weather or current could take control. But I pay high insurance rates to cover the ******** and fools that do.

Lepke,

Very good post and makes a lot of sense... and know exactly how premiums can go thru the roof. Paying 10% of the value, and you've bought another boat in 10 years, plus interest on your money, plus the deductible, and the hassle. Heck, I could argue against insuring at 2%.

[Rossland]

Originally Posted by john61ct

Can't get blood from a stone.

I suppose one day it will be illegal to sail poor, but in the meantime. . .

Hull insurance protects the boat owner, but liability insurance protects everyone else. We need protection from boaters who if they damage someone elses property just say "tough bananas" and think they can walk away.

That is why liability auto insurance is mandatory, and it should be for boats too.

[john61ct]

But for now the poor are still allowed to sail.

[Seevee]

Originally Posted by WesK

The term "self insure" really means "too cheap to buy insurance". I agree with you that some assets are not worth buy in insurance on but in most cases, these are covered by our homeowners insurance.

Regardless, you are taking a really big risk if you own a boat and don't have liability insurance on it. Lots of things can happen and most of us would be wiped out if we were held responsible for a death or amputation or burning a marina down.

I don't want to have to join the homeless people living under the bridge.

WesK,

Hey, living under the bridge is fine....

As for being self insured and cheap... it just might show prudent use of one's dollars. I know dozens of folks that do not insure boats, cars, plane or houses and they save that money to buy you a drink at cocktails. Now, not buying that drink.... THAT's cheap!