Leisure boating and yachting continue to be a popular pastime among the affluent. Although watercraft purchases dipped after record-breaking sales in 2020 and 2021, demand remains strong.¹

The quest for custom yachts — including opulent superyachts — is also rising. Currently, more than 1,300 superyachts are under construction, and wait times for these luxurious custom vessels average more than four years.²

As rewarding as the pastime can be, losses for boat and yacht owners have been trending upward. Claims cost can rise quickly, especially with new boats equipped with expensive high-tech electronics and stabilization systems.

Insurance carriers regularly release new — and different — insurance coverages for the boating and yachting market. That’s why it’s important owners protect against the most probable liabilities first and then look at other options available in the marketplace.

Agreed value vs. actual cash value policies

To protect your investment, it is crucial to have the right type of insurance for your boat. Marine insurance is not regulated the same way as other policies, such as homeowners, making it even more challenging to adequately insure your boat.

The first step is to procure a boat/yacht insurance policy that is an agreed value policy. This type of policy reimburses the owner for the original purchase price in the event of a total loss. For example, if a boat purchased for $600,000 sinks, catches fire or is deemed a total loss, an agreed value policy will pay $600,000 to settle the claim.

Another option is to purchase an actual cash value (ACV) policy. This covers only the estimated value of a boat/yacht at the time of the incident. Under an ACV policy, a boat purchased for $600,000 several years ago is covered for its current, depreciated value, not the purchase price. This can result in a loss settlement that may be less than the outstanding loan amount. It can be particularly problematic if the boat is held as collateral on a loan.

Larger boats have greater insurance needs, such as hull coverage and protection and indemnity (P&I) coverage for third-party exposures.

Marine insurance and risk management considerations

With many options available and policies that can differ substantially depending on the carrier, consider these factors when purchasing or renewing a policy:

• Lightning deductible. In areas susceptible to storms, such as Florida, lightning deductibles are becoming common. Similar to hurricane deductibles that took off in the 1990s, this is standard in many marine policies.

• Theft deductible. Popular outboard engines have made them targets for theft because they can be easily unbolted and removed. Given the high number of claims, many carriers now include theft deductibles in boat policies.

• Liability. If legal action arises due to a boating incident, liability coverage can defend the boat owner in court and pay for costs if the owner is found at fault. While liability coverage may be included under a personal umbrella policy, that is not always the case. In addition, the negligence of a yacht crew is usually not covered under an umbrella policy.

• Wreck removal. While most yacht policies provide some coverage for salvaging, wreck removal may not be included. If your yacht sinks in Lake Superior, for example, the U.S. Coast Guard will require it be raised, an expensive endeavor that also requires the boat owner to pay for fuel cleanup.

Contact HUB International’s Private Client experts for more information about maritime insurance and finding the appropriate policy to protect your watercraft.

¹ National Marine Manufacturers Association, “Recreational Boating Maintains Momentum Heading into 2023 as Americans Continue Prioritizing Outdoor Recreation in Record Numbers,” January 10, 2023.
² Luxuo, “Top 5 Trends in Luxury Yachting for 2023,” January 9, 2023.