Make sure you have enough boat insurance
When considering how much coverage to purchase for watercraft physical damage and liability insurance, you should ask yourself two questions; “How much do I have to lose?” and “How much damage can I do to others?”
How much do I have to lose?
Your goal when purchasing physical damage insurance is to be restored to same financial position that you were in before a loss. If you over-insure your boat you will pay more premium than you need to, and if you underinsure your boat, your investment is not fully protected. To get the right amount of insurance, you want to insure your boat with a limit that is equal to the boat’s current “Market Value”.
“Market Value” is the price that a similar boat would bring in a market of willing buyers and sellers, each operating without any pressure or constraints. Or to put this a little more simply, market value is the price you would get if you could sell your boat the day before an accident happens. This is how much you have to lose.
If you just bought your boat, the purchase price is a good indicator of market value. If you’ve owned the boat for a while, you can get a good idea of the current market value by checking the listing prices of comparable boats on websites with classified listings. Although keep in mind that list prices are just asking prices and actual sale prices will be lower by 10% to 15% due to negotiations.
The most accurate way to determine the current market value is to get a marine condition and value survey for your boat. A surveyor will inspect your boat’s physical condition, engine hours, level of maintenance, optional equipment, and geography (boat values do vary by region). Then by cross referencing various valuation resources, the surveyor will provide you with a market value for your boat. With a survey, you’ll know exactly how much you have to lose before your boat is damaged.
You should also ask “How much do I have to lose?” when purchasing watercraft liability insurance. But now we’re not talking about your boat, we’re also talking about your house, car, personal belongings, future income, retirement savings and college funds. All of your financial assets could be at risk if you are sued for negligence while operating your boat and don’t have sufficient limits to cover a court judgment against you. With this in mind, you might consider purchasing liability limits that are equal to or greater than your net worth and future earnings.
How much damage can I do to others?
Let's say you keep your boat in a marina. If your boat catches on fire, there’s a good chance that other people's property will also be damaged. Are the values of boats tied up alongside yours worth $50,000 or $500,000?
You should also rephrase this question to be, “How badly could I hurt others?” and consider scenarios that result in injury or death to your passengers or to people in other boats. Most states require car owners to carry a specific minimum limit of auto liability insurance in case they hurt someone with their car, but this is not necessarily true for boat insurance. However your marina may require you to carry specific limit of watercraft liability coverage as part of your dockage agreement.