It's August, the water is warm, the sky is blue, and many people are headed to lakes, rivers, and oceans in boats of various sizes. Accidents occur on boats as readily as they do in vehicles, and this brings insurance into the picture. While there are separate boat policies, the standard homeowners policy does provide some basic coverages for certain size boats. Therefore a review of these coverages is in order.
As with all insurance policies, the definition of the thing, and how the policy defines it, is important. The ISO homeowners policy does not define boats or watercraft, but it does define vehicles. "Motor vehicle" is defined in the policy as a "self-propelled land or amphibious vehicle". Seeing as boats are amphibious, they are treated the same as motor vehicles in the policy to an extent.
The policy provides limited physical damage coverage for boats under the special limits. The limit provided is $1,500. It applies to watercraft of any type and includes trailers, furnishings, equipment, and outboard engines or motors. Obviously, the policy intent is to provide limited coverage for smaller craft; $1,500 does not go very far in purchasing or repairing boats or equipment. Trailers and furnishings are self-explanatory, but what exactly is considered boat equipment? Equipment is something used to equip something for use; regarding a boat, this would be the radio, life jackets, and GPS unit. The insured's favorite fishing pole and beer cooler are not boat equipment. While they are used on the boat, and the insured may feel like the beer cooler is vital to the operation of the boat, it is really a recreational item. The boat can operate safely without the cooler, but the life vests are necessary.
While the special limit does apply, there is an exclusion under theft coverage for the theft of watercraft, equipment, furnishings, or motors while away from the residence premises. If the boat is docked at a marina for the summer and the life vests and GPS unit are stolen from the boat, there is no coverage. It is important to point this out to insureds, since many do dock their boats at marinas; not everyone is fortunate enough to live on the water and have their own dock.
The liability coverage is where boats get complicated on the homeowners form. The policy very specifically grants coverage for some types of boats but not others, based on length, type of motor, and horsepower. The coverage is listed as an exception to an exclusion, which makes it even more complicated.
The first exception is for stored watercraft. Liability coverage applies when the craft is stored, and the policy does not specify where the craft must be stored. Therefore, if the boat is stored off premises for the winter and an accident occurs, liability coverage applies.
Sailing vessels are the next exception, and they must fit certain criteria. Any sailing vessel less than 26 feet in length is covered. These are smaller boats that most carriers are willing to cover. Boats over 26 feet in length are covered, as long as they are not owned by or rented to an insured. This provides coverage for an insured if he is using a friend's or relative's boat. He has not paid to rent a boat, and it is not a vessel he owns. If an insured owns a sailboat over 26 feet in length, he needs to cover it on a boat policy.
Boats that are not sailing vessels but that have an inboard or inboard-outboard engine or a water jet pump are covered in similar fashion. If the boat has 50 horsepower or less and is not owned by an insured, coverage applies. An insured can rent or borrow a small motor boat or jet ski and be covered. If the craft has more than 50 horsepower, coverage is provided if the craft is not owned by or rented to the insured. Note that coverage is not provided for these larger craft if the boat is rented to the insured.
Boats with outboard engines of 25 horsepower or less are covered, whether or not they are owned by or rented by the insured. Larger vehicles, boats with more than 25 horsepower, are covered only under the following three circumstances:
- Outboard engine not owned by an insured
- Outboard engine acquired during the policy period
- Outboard engine acquired before the policy period but motor was declared at policy inception or intent to insure is reported within 45 days of acquisition
Larger engines produce more speed, and more speed can lead to more accidents, something the carrier wants to avoid.
Boating is a very popular sport and enjoyed by many people. Many people live on lakes and rivers and use small boats for fishing or just puttering around in the water. It is these small boats that the homeowners policy is willing to provide coverage for; these craft are really just large sports equipment, similar to ATVs or snowmobiles. Larger boats need to be covered on their own forms because the values and potential liability exposures need to be addressed individually.