Downsides to being uninsured

There are some interesting posts here on insurance. Thanks to those who have contributed.

My vessel and location are ticking a lot of boxes that is making prospective insurers pile on premium loadings and/or exclusions to the point that I'm questioning what risks will actually be covered and cost vs frequency/consequence of the accepted risks.

Has anyone consciously decided to self insure? Beside the financial risks (which are mostly not covered in my case anyway) what are the practical considerations?

I'm thinking:
Restricted marina access (dont care as I never use them).
Haulout/hard stand restrictions.

Any other(s)?

For the record, I'm:
>30yo vessel
Converted ex commercial vessel
Pole moored not marina docked
Home base is north of Australia's cyclone line

All have been reasons for declined insurance, exclusions or considerable premium loadings.

I certainly wouldn't go completely uninsured. However, if you're fine with self-insuring for loss of the boat, you could investigate a liability-only policy. That way you're covered for any 3rd party damage costs in an incident (such as a boat fire that damages a neighboring boat), but the coverage should be much cheaper than insuring the hull.

Go with Liability only. There is no way you can afford to cover the cost of an environmental disaster or a personal injury claim which could leave someone paraplegic for life, millions and millions.

The boat? Who cares? I wrote mine off when I bought it. It might be worth $40,000 or it might be worth nothing. It doesn't matter to me.

pete

Putting aside any other "related issues" like personal responsibility, etc., it might come down to your personal finances and prospects for future income.
What I am talking about here is the liability portion. Things like damage to other boats, passengers injured on your boat, sinking (the environmental aspects and charges more than the lost boat), and any other ways you could be assessed against. If you have accrued some "wealth", then without insurance you could be "risking" those assets. If you own next to nothing, then maybe not so much.
Not the most responsible way to look at it though.
Environmental cleanup costs can mount very quickly, (I have been in that business), and personally I would not go without at least liability insurance.

firehoser75 said:

If you have accrued some "wealth", then without insurance you could be "risking" those assets.

Environmental cleanup costs can mount very quickly, (I have been in that business), and personally I would not go without at least liability insurance.

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Let's say a guy has a $1M net worth, but is at fault in an incident that subjects him to liability of $3M. If he has $3M coverage, his net worth is not impacted. But if he has only $1M of coverage, he stands to lose everything. I am not sure my understanding is correct, but no one has ever explained to me why not. I have heard lots of theories -- one of my favorite is that as long as your coverage exceeds your net worth you have no exposure, but I don't believe that is the case (at least not in the US). Given the potential liabilities, how does one know how much liability insurance to carry?

MYTraveler said:

Let's say a guy has a $1M net worth, but is at fault in an incident that subjects him to liability of $3M. If he has $3M coverage, his net worth is not impacted. But if he has only $1M of coverage, he stands to lose everything. I am not sure my understanding is correct, but no one has ever explained to me why not. I have heard lots of theories -- one of my favorite is that as long as your coverage exceeds your net worth you have no exposure, but I don't believe that is the case (at least not in the US). Given the potential liabilities, how does one know how much liability insurance to carry?

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Ah, the game of "what if"...

You are correct in your example of a massive liability exposure having the potential to devastate the policyholder. Thankfully, those types of losses don't happen too often.

As to the question of how much coverage is enough on a marine policy; I recommend that a minimum of $500k liability be carried on a marine policy. Further, a personal liability umbrella should be considered as part of a person's financial suite. While the umbrella may not generally cover unique marine situations (such as pollution or wreck removal/salvage) it will cover as excess other liability events the individual may fin themselves in.

The responses so far while well intended and well thought out apply to the US. OP is in Australia. Not all nations are as litigious as the US. Liability in Australia may be a lesser concern than liability in the US.

Portage_Bay said:

The responses so far while well intended and well thought out apply to the US. OP is in Australia. Not all nations are as litigious as the US. Liability in Australia may be a lesser concern than liability in the US.

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Yes, Australia is a kinder, gentler nation in so far as liability is concerned

If I had the financial wherewithal to cover the loss of the boat, maybe a $250,000 liability settlement and a $100,000 environmental claim (oil spill, mowing down a coral reef, etc) and not significantly affect my financial well being, I would probably do it.

David

GoneDiving said:

There are some interesting posts here on insurance. Thanks to those who have contributed.

My vessel and location are ticking a lot of boxes that is making prospective insurers pile on premium loadings and/or exclusions to the point that I'm questioning what risks will actually be covered and cost vs frequency/consequence of the accepted risks.

Has anyone consciously decided to self insure? Beside the financial risks (which are mostly not covered in my case anyway) what are the practical considerations?

I'm thinking:
Restricted marina access (dont care as I never use them).
Haulout/hard stand restrictions.

Any other(s)?

For the record, I'm:
>30yo vessel
Converted ex commercial vessel
Pole moored not marina docked
Home base is north of Australia's cyclone line

All have been reasons for declined insurance, exclusions or considerable premium loadings.

Click to expand...

Being responsible so as to cover damage to others property or vessel (I have thrice been on the receiving end of hit and run marine wankers)
Wreck removal
And, as you mentioned, getting out of the water for maintenance is a biggy.

Pantaenious offered us a liability and wreck removal policy that worked out around 1% of vessel value but still had a brutal excess to pay if claiming.

Went full comp with new wave this year. Conditions for us were very favourable.

Thanks guys. All very good info and worth investigating. Yes I am in Australia: perhaps less litigious than the US but certainly still with very high enviro and salvage costs

However, so I have the full story, what's the practical, non financial risk, downsides to having no jnsurnace beyond limited marina access?

Thanks

When I was a commercial fisherman, 40 years ago, many fishermen didn't carry insurance. Especially those with wood boats. You could buy a new boat every 8 years with the commercial premiums. In those days you could tie up at the fish dock free. Usually nesting. If you were a good boat handler and didn't cause damage when docking or going alongside another boat then no insurance wasn't a big problem. 40 years ago, I never heard of a marina asking to see your insurance. Nobody had tow insurance. If you had a problem, another fisherman would tow or help out. And before the USCGs primary mission was drug enforcement, they'd tow you. Now they call a commercial tug.

Liability cover in Australia is generally greater in $s than USA, at $5-10M. Most things cost more here, labour costs are high, but the difference is not well explained. Accepting losing the boat without the benefit of cover may be ok, not taking liability cover is not, the risks are too high. It`s the old adage, if your 1980 Nissan totals a 2020 Rolls Royce,the loss of the Nissan is inconsequential but covering the loss of the Rolls is not.
Every time an insurer says "no", you have to disclose that to the next one, or you risk an assertion of "non disclosure" and denial of cover. I suggest the OP try a broker, there are specialist marine brokers, how good they are, no idea.

I would think one needs some sort of insurance coverage for a massive oil spill.

OldDan1943 said:

I would think one needs some sort of insurance coverage for a massive oil spill.

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8500L of diesel dumped in the Great Barrier Reef may not win friends. ?

If you have enough dosh to self-insure, just buy the damn insurance and maybe your broker will take you out to tea?

If you have a "net worth" of ~$2m and have ~$1m of insurance, and a ~$3m claim for an insured event, you are still better off with insurance.

Unless the claim is indefensible, the insurance company will usually defend it in an attempt to negotiate their liability less than $1m. If they succeed, they will also have relieved what otherwise would have been a ~$2m judgment against you, leaving your net worth wholly intact. They would also have covered your legal fees.

If they don't succeed, or it is a lost cause, you'll at least have the peace of mind of knowing that it wasn't for a lack of investigation, advocacy, and representation.

An insurance company isn't leaving ~$1m on the table easily.

I role played a few scenarios when choosing insurance. I would never try to self insure liability. However unlikely, there are plenty of scenarios that can play out and ruin you.

The fellow who owns this, only bought it last fall, and I noted had posted a go fund me page on his new project, so clearly bought it without the ability to fund his project himself. What do you think the chances are that he had insurance if he is looking for help to fix it? I hope I’m wrong.

https://komonews.com/news/local/boa...e3d2a-bbea-486c-bb95-0ad2766de15f&jwsource=cl

His new to him boat struck a breakwater and the breakwater appears to have moved because of it. I have no idea how this will play out, but this is the kind of gamble people are taking and I worry they do so without thinking the worst is ever going to happen. I suppose one might call the US litigious and that may even be true, but it’s also true that if you gamble other people’s property, you should expect that you do so on your dime, not theirs.

In our club every boat berthed in our 140 slips has to have insurance. In addition, we need to include our club as “additionally insured“. That way if any member’s insurance lapses the club knows about it and can quickly speak with the owner to get it remedied. Without insurance the boat has to leave.

I can’t think of any marina that would allow you to store or berth an uninsured boat. At the very least you are required to have liability which includes $900+K fuel spill protection.
If your diesel tanks leak and your bilge pump starts pumping it out into the water or on land heaven help you. I shudder at the thought of a state environmental agency involved with clean up without spill protection. And no marina is going to ignore it and take on the liability. The costs for clean up and the fines are enormous. Not having insurance suggests negligence on your part.. It’s game over for you... DON’T DO IT!

Maritime law is very different then civil. In some cases your total exposure is the vessel value

If you're well off enough to own a decent sized boat and self insure it, you are also a target for exaggerated claims should something happen. Even if you successfully fight the claim, the costs of doing so could really hit hard.

Respectfully, I take issue with your statement. Our club is in NY like you. I’ve had direct dealings with the NY DEC. Fuel spills in tidal waters is a very very bad situation. I have personally witnessed their “attentiveness” and tactics pertaining to spills from a fire. It’s brutal.

Having a clunker of a boat of consider size, worth for arguments sake say $20K will NOT limit your spill liability to that figure.

This is a bet that is fraught with danger.

I self insure my hull. Many marinas will not contract for storage without liability/pollution coverage. SeaTow covers towing but not salvage. So insurance beyond basic liability/pollution is simply a matter of risk tolerance.

I can't speak for OZ, but around here in the US, no insurance (including no liability) would mean:


1) No long term moorage available to you


2) In some cases no transient moorage


3) No haul outs anywhere


4) No travel to many other countries where minimally liability insurance is required.

twistedtree said:

I can't speak for OZ, but around here in the US, no insurance (including no liability) would mean:


1) No long term moorage available to you


2) In some cases no transient moorage


3) No haul outs anywhere


4) No travel to many other countries where minimally liability insurance is required.

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I`ve not been asked for evidence of insurance at haulout, odd, thinking about it. Definitely required for marinas, permanent and transient.
I would not sleep well without at least liability cover, and that`s a good test, for lots of things.
A potential short answer to "What`s the downside?" is "Bankruptcy".

twistedtree said:

I can't speak for OZ, but around here in the US, no insurance (including no liability) would mean:

4) No travel to many other countries where minimally liability insurance is required.

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Thanks. I've never heard of this one. Would you expand, perhaps with some applicable countries. I doubt most of my nearby Asian countries would be included but I'll investigate.

Cheers

Larger, nicer marinas in Mexico and Central America are reportedly increasingly likely to require liability insurance. I carry liability insurance while undergoing a refit in Ensenada MX (pacific side, just south of California). About $450/year. I forget if the limits are $300k or $500k.

International full coverage cruising insurance is increasingly expensive and restrictive. Many cruisers (sail, no loan) forego full insurance but almost all I have seen carry some form of liability.

Peter

BruceK said:

I`ve not been asked for evidence of insurance at haulout, odd, thinking about it. ".

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We have to produce evidence every time.
Possibly a big boat/big yard thing

Simi 60 said:

We have to produce evidence every time.
Possibly a big boat/big yard thing

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Are you south of Bowen?

Sometimes. ^^^^^
Have been for lifts thus far

BruceK said:

I`ve not been asked for evidence of insurance at haulout, odd, thinking about it. Definitely required for marinas, permanent and transient.
I would not sleep well without at least liability cover, and that`s a good test, for lots of things.
A potential short answer to "What`s the downside?" is "Bankruptcy".

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Actually you understated the downside. Damage to reefs can carry criminal charges, generally not made if compensation provided.