Boat insurance pitfalls: Agreed versus market value
Check your boat insurance policy to ensure you won’t be disappointed if there is a total lossA marine insurance specialist has warned owners to learn the difference between their boat’s market and agreed value – or risk losing thousands of dollars in a potential claim.
Damian Pugh is the director of Queensland-based insurance brokerage HELM Insurance Services. He said most people only found out what cover they had “once things had gone pear-shaped”.
“If you don’t know which type of policy you have, you could be out of pocket by a small fortune in a total loss of vessel claim,” Pugh said.
“As an example, their boat might have been insured for $145,000 in recent years – that is the figure at the top of their paperwork – but through ignorance and failing to make a simple update, they potentially might get paid out just $100,000,” he said.
“It’s such an easy trap to avoid and generally it’s not the insurance company’s fault, but rather, that of the boat owner who failed to take one simple step.”
Agreed value is when the owner and insurer settle on the value of the boat in the event of a total loss and the value does not change. However, market value represents what someone would pay if they bought the boat off you, taking into account its age, condition, and even the brand of the boat. Market value usually falls as a boat ages.
What type of cover?
Pugh said owners often were not aware of what type of cover was specified under their insurance policy.
“When you see people slandering insurance companies on social media sites and in boating circles about having been paid out far less than they think their boat was worth, in perhaps 80 per cent of cases it was the boat owner’s own fault for not declaring which of the two types of insurance they wanted,” he said.
Part of the reason why boat owners sometimes fall short when making a claim is that a policy will revert to market value after a few years, even though an unwary owner is paying the same premium.
“Time and time again, policies are being taken out on market value and renewed on market value even though their insurer reminds clients to check the sum insured at each renewal.”
Top six boat insurance tips:
- Check what you are covered for. Marine insurance usually covers off physical damage to your boat, its motor, and potentially the trailer and other equipment such as fishing rods in the event of theft, fire, vandalism, accident and storm damage. Note that there may be some odd exclusions, such as lures, which are not covered.
- Check to see if you need to take out any extra cover. For example, the trailer may not be included in the default policy. Is it covered for towing and breakdowns? Is non-boating equipment such as a mobile phone or camera covered? Are the boat’s electronics? If you’re chasing sailboat cover factor in any racing you will do, as this will also affect the policy.
- A policy should also protect you against personal liability if someone is injured, but the extent of the cover may vary between insurers. It’s worth asking.
- Ask about lay-up cover. If there are certain months each year where you don’t use your boat – the traditional start to the southern boating season is after the AFL grand final – then you could get a reduced premium.
- If you use a boat for waterskiing, make sure that the gear you use is also covered under the policy.
- Cruisers will need to ask if the policy covers them for anything stowed in a boat’s lockable cabin.
Note that just like a car, boat owners also can choose between third party, fire and theft insurance – you are only covered for the damage you cause to someone else’s boat, or your boat catches fire or is stolen – or third party insurance alone.
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