Is coverage for watercraft sufficient under a HO policy?

Now that it looks like winter is over and we are going right to summer, you might have some clients looking to put their boats in the water for some fun and relaxation. When insuring watercraft, there are typically a couple of options. The HO policy can be endorsed (provided the watercraft meets the guidelines) or the watercraft can be insured on a separate stand-along policy. Is there a difference in the coverages? Yes, and actually many of the differences involve areas that occur with some degree of frequency.

Issues such as:

  • Waterskiing (or tubing). If this is a potential scenario, be aware of some limitations on the HO policy. If one of the water-skiers gets hurt and needs some medical attention, there is a good chance that the Med Pay coverage under the HO policy will not respond.
  • Pollution. If gas is accidentally spilled into the water (yes, it happens), there will probably not be any coverage under the HO policy for this “pollution” exposure.
  • Towing / wreckage. If the watercraft is involved in an accident that results in the boat needing to be towed to shore, this is not a peril insured when the coverage is placed on the HO policy. In addition, wreckage removal is not covered by most HO policies.
  • Valuation for physical damage. The options under a HO policy are more limited typically only providing coverage on an ACV basis. Securing the valuation on an “Agreed Value” basis is definitely preferred.

So how do you secure coverage for the above issues? A good best practice is to provide your client with a proposal for a stand-alone watercraft policy. The premium will be higher but that is because the coverage is better.

If you are thinking “the client will never spend the extra premium”, quite honestly, this is not your call. It is best to provide the client with options and explain the difference and the value of a stand-alone policy. Thus, when dealing with your clients on their watercraft exposure, provide them with options to consider. Not only will this allow your client to make an educated decision, it will also serve as an element of protection should an uninsured loss occur.

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