Consumers are faced with a multitude of choices when shopping for boat insurance. However, the decision usually comes down to purchasing a boat insurance policy or adding the boat to your home insurance policy. Regardless of how the boat is insured, the decision is usually based on price without knowing the coverage and how the decision can affect the settlement of a claim.
A boat insurance policy provides physical damage coverage on an Agreed Value basis or an Actual Cash Value (ACV) basis. The amount you will receive in the event of a total loss can vary greatly between an Agreed Value policy and an ACV policy.
Agreed Value – The amount insured (agreed value) is the amount you will be paid in the event of a total loss. The value of the boat is determined at the start of the policy and can be determined by it’s purchase price or by a qualified marine surveyor.
Actual Cash Value – You will be paid the replacement cost of the boat less depreciation in the event of a total loss. Below is an example of Agreed Value vs Actual Cash Value loss settlement.
|Actual Cash Value – Premium $300.00 per year||Agreed Value – Premium $400.00 per year|
|Less Depreciation||$-3,000||Less Depreciation||$ -0|
|Less Deductible||$ -250||Less Deductible||$ -250|
|ACV Settlement||$4,750||Agreed Value Settlement||$7,750|
In this example, saving $100 for an Actual Cash Value policy would have cost you $3,000 after the settlement of the claim.
Often, the most cost effective option is to add the boat to your home insurance policy. This is due to the fact that coverage for your boat is very restricted under a home insurance policy. All home insurance policies insure your boat on an Actual Cash Value basis. Other than the limited coverage, there is another reason you should consider insuring your boat under it’s own policy. If you submit a boat claim on your home insurance policy, it will be counted as a claim on your home insurance policy. If you have had several claims, the insurance company may cancel your home insurance policy for claims frequency. Should this happen, your only option may be to insure your home with a specialty carrier who will charge you a lot more for less coverage and it may be years before you can insure your home with a “regular” market again.
When shopping for boat insurance, make sure that you know the basis for claims settlement (Agreed Value vs Actual Cash Value) before you r purchase decision. Also, find out if the Agreed Value policy extends to the motor and other items in, or on the boat. Some Agreed Value policy cover the boat on an Agreed Value basis but the motor and contents are on an Actual Cash Value basis. Saving money now can cost you later.
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