GUIDE: WHAT EVERY BOAT OWNER SHOULD KNOW
When was the last time you read the fine print of your marine insurance policy? For many boat owners, the real test of their cover only comes when disaster strikes – a collision, theft, storm damage, or worse. That’s when the unpleasant surprises surface, as policyholders discover gaps or exclusions they didn’t know existed.
Insurance can feel complicated, but at its heart, it is a contract between you and your insurer. The law requires that insurers clearly state rights and obligations before a policy is signed. Nothing is hidden, but the responsibility lies with you, the policyholder, to read carefully, ask questions, and understand what you are buying.
This guide won’t replace reading your own wording in detail, but it will help you navigate the key considerations when insuring your boat, equipment, and liability.
Decide What You Want to Insure
The starting point is to be clear about what exactly you want covered. This may sound obvious, but it’s easy to overlook future plans.
- Upgrades and modifications: If you’re planning structural changes, engine replacements, or adding electronics, check how your policy treats new or additional gear. Some have limits on unspecified equipment.
- Third-party liability: This should be included automatically, but confirm it. Liability claims can far exceed the value of the boat itself.
- Personal effects and accessories: Policies vary. Some cover these generously, others impose strict limits. Remember, marine insurance is primarily for your hull, not a substitute for household contents cover.
Agreed Value vs. Market Value
One of the biggest decisions is how your boat’s value is set in the policy.
- Agreed Value
- Your boat is insured for a fixed sum, typically the purchase price or a professional valuation.
- If the boat is a total loss, you receive that sum (from policy inception or renewal).
- Often seen as the most predictable option, but not always available – some insurers restrict it to moored craft rather than trailer boats.
- Market Value
- Pay-out is based on the boat’s worth at the time of loss, considering age, condition, and market conditions.
- Insurers may commission their own valuations; you can also supply independent assessments.
- Premiums may be lower, but pay-outs less certain.
The majority of claims are for partial losses, not totals, and this is where depreciation bites. Policies often reduce pay-outs on items that age quickly: sails, rigging, outboards, covers, and electronics. A three-year-old dinghy lost in a storm may be compensated as a three-year-old dinghy, not a new replacement. Electronics, in particular, depreciate rapidly due to obsolescence rather than wear. Some insurers allow a grace period of two or three years before depreciation is applied. Others handle electronics differently. Always ask the question before signing.
The consensus in the industry is that Agreed Value is usually better, but there is no universal rule. Each insurer has its own approach, and the distinction between the two types of cover isn’t always clear-cut.
The Temptation of Cheap Premiums
It’s natural to look for the lowest premium, but the cheapest policy may leave you dangerously exposed.
For instance:
- Liability limits differ widely.
- Not all insurers include personal injury cover.
- Personal effects allowances can be small or excluded altogether.
Even the sum insured can be misleading. A common mistake is to base insurance on a boat’s listing or asking price, rather than the actual purchase price. A yacht advertised at $100,000 but sold at $80,000 should be insured at the true market value – otherwise, you risk paying higher premiums for cover that may not be honoured at claim time.
The key principle is simple: premiums reflect risk. If your boat is insured above its real value, you’re not just wasting money; you may also complicate the claims process.
Geographic Coverage
Where your boat is, and where you intend to take it, matters enormously in marine insurance.
- Domestic limits: Some policies exclude higher-risk areas such as New Zealand’s west coast or impose conditions beyond territorial waters.
- Onshore & transport: Check if your policy covers trailering, storage ashore, or while under repair in a workshop.
- Offshore cruising: Standard cover usually ends at NZ waters. Offshore extensions may be possible, but they must be applied for well in advance. Insurers will want assurance that both vessel and crew are capable of long voyages.
- Cyclone season restrictions: Planning to sail the Pacific between December and April? Many insurers will decline cover outright during this period.
Never assume your policy follows you wherever you go, always confirm the geographical scope.
Reducing Your Risk (and Your Premiums)
Insurance companies, like any business, want to minimise risk. The more you demonstrate competence and responsibility, the more likely you are to earn favourable terms or discounts.
- Experience and qualifications: List your boating background, years on the water, and any formal qualifications. Coastguard certificates or Safe Boating courses carry weight. Don’t just write “lots” of experience on your proposal; detail it.
- Crew capability: Human error accounts for most marine accidents. Demonstrating that you and your crew are competent reassures insurers.
- Mooring arrangements: Where your boat lives is critical. Marina-berthed boats generally attract the lowest premiums thanks to security. Pile moorings cost slightly more, while swing moorings, exposed and less secure, carry the highest loadings.
- Vessel build & compliance: Boats built to survey or complying with safety programmes qualify for reduced premiums. Diesel engines are generally cheaper to insure than petrol. Certain construction types, ferro-cement or multihulls, may be excluded or attract surcharges.
Insurers reward those who make their lives easier. Demonstrate good maintenance, strong safety standards, and prudent seamanship, and you’re likely to see that reflected in your premiums.
The Evolving Insurance Landscape
Marine insurance today is more accessible and, in some cases, cheaper than in the past. Globalisation and competition mean premiums are kept competitive. At the same time, regulators such as the Maritime Safety Authority have become stricter, pushing higher safety standards onto vessel owners.
This benefits responsible boaters: insurers are increasingly willing to reward proven competence, good records, and well-maintained vessels.
Key Takeaways for Boat Owners
- Know what you need insured: Hull, gear, accessories, and liability.
- Understand how your boat is valued: Agreed Value gives certainty; Market Value reflects current conditions but may disappoint at claim time.
- Don’t chase the lowest premium: Cheap cover often means cut-down benefits or exclusions.
- Check the fine print on depreciation: Especially for sails, outboards, and electronics.
- Clarify geographical coverage: Onshore, offshore, and during cyclone season.
- Prove you’re low-risk: Experience, training, and secure mooring can all lower your costs.
- Stay up to date: Policies evolve; review yours regularly, especially after upgrades or new purchases.
Final Word
The “moment of truth” in marine insurance comes only when you make a claim. By then, it’s too late to discover that your policy excludes the damage you’ve suffered.
The good news? With preparation, honesty, and attention to detail, you can secure insurance that genuinely protects you, your passengers, and your vessel. Take the time now, before you leave the dock, to ensure your cover is as seaworthy as your boat.
Disclaimer
The information provided in this article is for general informational purposes only and does not constitute financial, legal, or insurance advice. While every effort has been made to ensure accuracy at the time of publication, Powerboat Magazine and the article’s contributors accept no liability for any loss, damage, or reliance arising from the use of this information. Readers should be aware that marine insurance products, terms, and regulations may vary, and are encouraged to seek independent professional advice or consult directly with a qualified insurance provider before making any decisions regarding coverage.
