Insurance or not?

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?

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.

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

Paul

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.

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.

Sealife said:

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.

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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.

Sealife said:

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.

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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.

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.

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.

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

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.

Sealife said:

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.

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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.

Can't get blood from a stone.

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

Seevee said:

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

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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.

smitty477 said:

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.

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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.

WesK said:

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.

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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.

Lepke said:

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.

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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%.

john61ct said:

Can't get blood from a stone.

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

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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.

But for now the poor are still allowed to sail.

WesK said:

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.

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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!

Seevee said:

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.

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Of course you can argue anything you want but it happened on a raft up we were on at the time and they did lose the case and they had to pay up.

Last year on July 5th I was "T" boned when driving my pickup along a street at 30 mph. Was unusual in that I was across from a commercial building supply store so they not only called the cops but also supplied video - I was dazed - truck had $20K damage. Other driver had no insurance but mine provided the coverage and pursued the driver after I was paid out. Learned about a month ago that they put a lien against his home and also his paycheck for all damages plus the fines and costs of in-insurance.

Almost 10 years back now my wife was a witness to a boater who threw up a huge wake in an anchorage and that wake rocked two boats near ours where a couple of folks fell and got injured. The boats sustained some decent damage as well - certainly not the owners of the anchored boats fault. Real long story short they found the offending boat which did not have insurance and they are paying as well - subrogated by the boats policy where the folks were injured.

Had another one where a friend was entering the harbor with just 42' Sea Ray just coming off of plane. Out of the side around a breakwater comes a center console about 25' with a "T" top at maybe 30 knots and plows into his bow right behind the fwd most glass. Two 'kids' get ejected but have very small injuries - amazing. But the Sea Ray is pierced in a big way like maybe a 3' by 5' hole but most all above the waterline. Took over a year to repair that mess and their was no way that owner was going to avoid that loss either.

You asked about losses that we personally witnessed and were around so there is a few.

Insure or not - your choice.
FWIW - insurance on out 50" diesel boat was really cheap as we had a higher deductible - it was not for a scrape at the dock it was for high liability events.
Perhaps check and see hat the rates do at 2% and 3% deductibles.

Rossland said:

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.

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Agreed 100% and I have said it before. Now if someone can post a million dollar bond, perhaps he/she should be allowed to boat without insurance.

Anyone here actually have their boat sink and you or your insurance paid for a fuel/oil cleanup past basic salvage service?

Before you answer, I will be asking who did it, the costs and if you have any documentation where the nuts and bolts can be researched.

As I have posted before, I am not sure I have ever seen a salvage or even serious fuel spill by a recreational boat under 65 feet be "cleaned up" and charged.

Possible yes, but so rare I cant remember even one.

WesK said:

Agreed 100% and I have said it before. Now if someone can post a million dollar bond, perhaps he/she should be allowed to boat without insurance.

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WesK,

Good point, but how about 10 million, or 100 million. There will be claims for that, too. You might as well have coverage for it all. You're not going naked above 10 million are you?

I agree with you, Seevee. We usually lose money on the insurance deal and insurance companies generally make money.

There isn't much choice in avoiding liability insurance if you stay in a marina, but if my hull insurance cost increased substantially I'd certainly reconsider it.
Right now I only pay about $US 550/year for complete coverage so It seems like a fairly good deal.

I don't bother with car insurance other than 3rd party liability, and I've come out ahead over the years.

Yes, from a social policy POV, at those sorts of rates, I would go along with even "poor" people being made to pay for liability.

Up to say 5% per year of the actual market value of the boat, with a $500 floor I suppose.

AusCan,

$500 is a bargain! You either good at shopping or a great risk.... or both.

john61ct,
Not sure what a $500 floor is, but 5% would be brutally high! Heck you'd pay for a new boat in about 13 years... plus the deductible. Wouldn't make much sense.

I have hull coverage on my boat, not because Iam so worried that I'll make a mistake, but because I'm worried that someone else will make a mistake and not be able to pay, or not really be "at fault" or "negligent".

Lets say for example that the boat next to you catches fire. Thats a great example. Your boat, sitting 8 feet away is also a total loss.

You would think that you could just make the other boats owner or through proxy his insurance company pay for your loss. Thats a pretty good and often mistaken assumption.

You have to prove that the owner was negligent in order to be able to recover. But you say that "his boat burned my boat", well sorry but that does not prove negligence on his part.

You have to prove that he, the owner did something "negligent".

So you say, geez I think he had a electric heater on board, and you think that proves negligence.

But wait... That proves nothing. If the heater caused his boats wiring to melt and catch fire that still does not prove negligence.

You see proving negligence is not so easy with a boat, sitting all alone at the dock.

Yes it's easier if he was docking and rammed your boat, but allot of losses do not involve a boat under way.

Thats why I will always carry hull insurance. My insurance, hull and liability is about 1% of the agreed value per year, and although I wish it were cheaper, I am happy to pay it.

Hull insurance - I don't care. It's up to you because you are the only one impacted by a loss of/to your boat. If you want to absorb the risk of a loss, that's your business.

Liability insurance - I think it should be mandatory because it's all about you making good on the impact and damage you inflict on others. I'm sure plenty of people fully intend to self insure and make good on any damage they might cause, but I doubt many are actually capable and willing when push comes to shove. Yes, you can be careful, but crap still happens.

Here's an example. A guy in town here owned an old fishing trawler. Last fall it dragged anchor, grounded just down the shore from my house, and started to break up. They guy had no money, no insurance, and no assets. So while he looked on, the city paid $30k for an excavator and dump trucks to tear the thing apart and haul it away. So I (and others) paid the bill for this ass hole who couldn't/wouldn't take responsibility for his own asset and actions. Now $30k for a boat salvage and disposal is actually pretty cheap. Just think if his boat had caught fire and burned a Marina and a few hundred boats? Or leaked fuel all over the place. Or if the boat had broken up and become lawn art for me and all my neighbors.

It is a mistake to think that you can be careful enough boating to never expose yourself to a liability claim.

It is a mistake to think that your exposure to a liability claim depends on the size or cost of your boat.

And it is a mistake to think that if nobody on this forum ever had a particular thing happen to them that it has never happened to anyone or will never happen to anyone.