Do I Need Boat Insurance?

“Do I need boat insurance?”

People ask me this all the time. I tend to turn the question back on them, asking, “How much do you have to lose?”

Boaters tend to look at insurance as an expense. For me, though, it’s cheap. If something goes wrong, the safety net that insurance provides is far greater than the upfront cost.

So, the short answer is yes! You do need boat insurance!

Now, let’s answer common questions about insurance options and requirements through the lens of a boat charter business.

Do I Need Boat Insurance for Chartering?

No matter what kind of business you run with your boat, you’ll need some kind of insurance. Make sure you get the right coverage by following these steps:

1. Research local state laws

Each state has different insurance requirements for boat charters. They break down these requirements based on liability for injuries and damage. You can contact your state maritime authorities to learn about your area’s regulations.

2. Understand federal guidelines

The U.S. Coast Guard sets safety and operational standards for boats carrying passengers for hire, which may indirectly influence the type and extent of insurance needed. For example, suppose you don’t have the proper safety gear onboard your boat in an accident. In that case, you’re not following federal guidelines. Your insurance company won’t cover the damages.

3. Consider international rules

Operating in international waters or foreign ports comes with a new set of rules, regulations, and insurance needs. I maintained my own policy with Lloyd’s of London because I did a lot of international deliveries.

In many cases, when I made an international delivery for someone else, I’d put them on my policy as a third party in case something went wrong.

4. Get adequate coverage

Though not federally mandated, it’s crucial to have substantial insurance coverage to protect against liabilities, especially for charters carrying passengers.

Don’t be tempted to choose the cheapest insurance option (unless it’s right for you). However, I can assure you that minimum coverage won’t protect you if you have much to lose.

5. Consult experts

Ensure you get the right policy by speaking to marine insurance providers or maritime law professionals. Tell them what you plan to do, and don’t lie.

For example, I can’t leave my boat in Florida during hurricane season. If I tell my insurance company that I moved it to the Northeast and don’t, and it gets totaled, they won’t cover the damages.

What Type of Boat Insurance Do I Need?

Get comprehensive boat insurance for your charter operation by covering these bases:

• Passenger liability insurance: Protects against liability if a passenger gets hurt or their property is damaged onboard your boat. 
• Crew protection insurance: If a crew member gets injured or sick on your boat, this policy covers their medical costs, lost wages, and other damages. It’s like a personal insurance policy made specifically for crew members.
• Hull insurance: Provides coverage for physical damage to the vessel itself. It’s recommended depending on the age/condition of your boat.
• Marine general liability insurance: This broad-coverage policy protects against third-party injury and property damage beyond basic passenger coverage.
• Dockside liability insurance: This policy protects against liabilities when your vessel is moored. Dockside liability insurance protects you against fraudulent claims if someone trips in front of your boat and tries to blame you.

What Impacts My Boat Insurance?

Your insurance needs — and costs — fluctuate depending on several factors. Let’s explore them one by one.

Seasonality

I had a six-month season when I operated charters on my boat in New Jersey. I worked it out with the insurance company so that I only had commercial insurance coverage when I used it. Ask your insurance company if they have different cost structures.

Seasonal operations face fluctuating income, affecting their ability to afford annual insurance premiums. If your insurance company offers “lay-up” discounts, you’ll save money on your premium.

Risk exposure changes with the seasons, influencing insurance needs. In some cases, you may want extra seasonal coverage. For example, stormy seasons increase the risk of damage, so enhancing your policy will be worth the cost.

Location

Many areas mandate certain types of coverage, so insurance requirements depend on local maritime and commercial laws. 

Other ways your location might impact your insurance cost and needs include:

• Local environmental risks, such as hurricanes, typhoons, or ice
• Type of waters, such as near-shore, inland, or international
• Availability of services, as it might be difficult to provide salvage or get repairs in remote areas

Contractual Obligations

Contractual obligations specify operator responsibilities such as damage liability, delays, or accidents that may occur during charter operations. These unique contractual responsibilities may require insurance tailored to specific contractual risks. 

For example, if a storm prevents you from operating your water taxi, your contractors might not pay you. You might want insurance to cover that gap.

Charterers’ legal liability insurance also addresses risks like hull and environmental damage.

How Do I Avoid Common Boat Insurance Pitfalls?

Navigating boat insurance can be complicated, so making a few mistakes isn’t surprising. Here are the most common traps that boaters fall into:

• Underestimating required insurance coverage
• Not being listed as an additional insured person on third-party policies
• Unintentionally creating coverage gaps by not updating policies to match contractual obligations

To avoid these mistakes, take a few preventative measures. First, ensure you fully understand your liabilities, requirements, and regulations for your area and line of work. Second, regularly review and adjust your insurance coverage to align with current risks and obligations.

Beyond Boat Insurance: Staying Safe on the Water

I hear it from my students: “Captain Bob, why are you teaching me about navigating storms? I never go out in a storm!” I remind them that just because the day started out sunny doesn’t mean a storm won’t develop while you’re out on the water. 

I give a similar answer when students ask, “Why do I need boat insurance?” Just because you’ve never had an accident doesn’t mean you won’t have one sooner or later. Don’t neglect the importance of comprehensive insurance coverage.

Still, the best insurance policy is the one you never have to use. Protecting yourself and your property begins with safe practices. Earning a captain’s license guarantees you have the knowledge and skills to stay safe. Explore our course offerings today.