One word sums up recreational boating life: passion. Understanding this passion is key for agents and brokers who want to tap into the boater's marketplace. And while there are vast differences in the purchase price of watercrafts, agents who want to grow their businesses in the affluent marketplace can improve their successes by working with carriers to help navigate the softer market. Marine coverage is complicated, so understanding the complexities is critical to agents' successes. "Brokers, unfortunately, can get into trouble if they are not aware of the environmental laws and other regulations governing the waterways of the United States and other countries," said Fred Silberman, broker and president of Alliance Marine Risk Managers Inc., Westbury, N.Y. "When clients want to take their boats to the Caribbean or the Greek Isles, or sail along the U.S. coastline, an agent's knowledge is key to obtaining the proper insurance coverage." That's why Silberman maintains close contact with his customers to know their travel plans and status of any crew members. At the same time, risk can vary depending on the boater. A boating amateur or even a moderately practiced enthusiast may be overly confident in his or her knowledge. So when talking to clients, it is important to discuss the skill levels of the owners and crew because it does impact their liability exposures. Additionally, agents assisting their affluent boating clients who navigate the risks associated with owning watercraft, need to keep in mind several insurance guidelines to reduce their exposures and protect their assets. Broader coverages Wealthy boat/yacht owners expect broader coverage for their prized possessions. The watercraft's value and age affect the type of insurance coverage. The payment basis for physical damage to the watercraft can be either "replacement cost" or "agreed value." For replacement cost coverage, the boat generally is insured for less than $1 million and is 3 years of age or less. Agreed value coverage is for watercraft insured for $1 million or greater, or more than 3 years of age. With agreed value coverage, boaters essentially settle a covered total loss before it occurs. The client and the insurance carrier agree to the boat's insured value at the time the policy is issued. To succeed in this affluent marine market, brokers also must understand how clients use their boats. For instance, do they sail year round? Or do the clients use the boats in the summer only? And where do they take it? Wealthy clients often boat all year and need a policy that provides 12-month navigation. Some boaters only need "regional navigational limits," which covers the watercraft being used in a more confined or restricted area. Clients who do not use their boats all year, or travel within certain regions, can take advantage of lower premiums. But other affluent boaters require broader navigational limits where they can navigate the Atlantic, Gulf, and Pacific coastal/tidal waters, the coastal/tidal waters of the Bahamas and the inland waters of the continental United States and Canada, including the Great Lakes. In tandem with these broad coverages, agents can help their clients identify other risks surrounding the boating lifestyle. Consider the following insurance solutions: o Personal effects coverage: covering onboard personal effects of the customers, guests, and crew o Precautionary measures: providing reasonable costs clients incur to move the watercraft out of harm's way in the event of a covered peril, including named storms or a marina fire o Emergency towing and service: coverage is in place for an emergency other than a covered loss o Marine environmental damage: paying damages if the customer harms marine habitat through physical contact with the watercraft o Broad medical payments: covering medical payments in the event of an accident o Uninsured boaters' protection: providing a covered person with a pre-determined dollar amount for covered damages for bodily injuries resulting from a boating accident with an uninsured/underinsured vessel. Other protections at sea There are other policy coverages available for watercraft exposures including: o Deductible waivers for physical damage on a partial loss caused by another vessel o Additional living expenses coverage for when the client has experienced a loss and needs temporary living arrangements o Wreck removal insurance, such as when a clients' sunken watercraft obstructs a traffic channel and it is required by law to be removed. Other protections include search and rescue, manufacturer's defects, mechanical breakdown and faulty repair, liability coverage for waterskiing and limited charter coverage. From an underinsured risk standpoint, agents need to discuss the coverage for watercraft-related equipment. Trailers, sails, outboard motors, electronic navigational equipment, fishing tackle, and on-shore watercraft equipment all require protection from damages and losses. Agents and insureds also should discuss coverage for other small boats, including personal watercraft and tenders, associated with the boating lifestyle. Personal watercraft are sometimes carried onboard the larger watercraft and are defined by the U.S. Coast Guard as motorized vessels less than 15 feet in length. Tenders are smaller boats only used to bring passengers to destinations a larger vessel cannot. And lastly, there are other small boats, operated differently than tenders, such as a fishing boats, that are towed by a yacht owner. The bottom line is that agents need to be aware of all "toys" associated with the larger watercraft and determine with the carrier if coverage is automatic or if the smaller boats need to be scheduled onto the policy. Lifestyle concerns for the wealthy boater also need to include discussions around the following coverages: o Temporary substitute watercraft: A customer's watercraft is out of normal use for more than 10 days due to a covered loss, so the carrier pays to charter a comparable temporary substitute. o Newly acquired watercraft: A client purchases another boat, so the carrier provides coverage for it allowing the customer up to 30 days to report the purchase. One last coverage consideration is when boaters hire a full-time crew. The Jones Act is a federal law pertaining to a vessel owner's liability to the captain and/or crew for work-related injuries. High-net-worth yacht owners with full-time paid crew should be strongly advised to ensure that their liability coverage includes a Jones Act provision. Agents can work with their insurance carrier to provide the appropriate liability coverage for the captain and crew. Like most other lines of business, marine insurance is experiencing a softer market. However, there are ebbs and flows to every market. "I'm optimistic that the market will rebound later this year. Once people have confidence that the economy has bottomed out, it will head in a positive direction," said Eric McDowell, an agent and executive vice president with Christi Insurance Group, Glenside, Pa. "However, the market is not as difficult as it was in the early '90s when a luxury tax was put into place on boat purchases. That almost devastated the market. Once it was repealed, the boating industry prospered." Whatever levels clients reach in their boating passions, the primary role of agents and brokers is to help them safely navigate the insurance marketplace. By thoroughly understanding the risks and exposures associated with owning watercraft, agents can help their clients protect this passion. Susan Vella is president of Chubb Insurance Solutions Agency Inc., a wholly owned subsidiary of The Chubb Corp. The full-service agency is staffed by licensed and trained insurance consultants who provide non-appointed agents and brokers the ability to obtain Chubb's personal insurance products and services for their key clients. She can be reached at [email protected].