Coverage for the Average Boatowner

Summary: The American Association of Insurance Services (AAIS) has developed a boatowners policy (BT 0100) that provides coverage to meet the needs of the average boatowner; generally, that is, the family-oriented watercraft.

There is limited property and liability coverage for watercraft in the standard homeowners policy. The AAIS homeowners form, in the limitations on certain property section, provides $1,500 coverage for watercraft, “including their trailers, furnishings, equipment, and engines or motors.” This coverage, however, is not open perils coverage. Similarly, the homeowners form liability coverage applies to watercraft but subject to many restrictions.

The best procedure, therefore, is to cover a watercraft exposure with a boatowners policy. Following is a discussion of the AAIS boatowners form.

Topics covered: Eligibility Underwriting criteria Policy overview Insuring agreement Definitions Property coverages Liability coverages Uninsured boaters coverage Duties in event of loss or claim Loss settlement provisions Payment provisions Policy conditions

Eligibility

The American Association of Insurance Services (AAIS) boatowners form is designed to cover an individually owned pleasure craft that is not greater than thirty feet in length. The watercraft will not be capable of speeds in excess of 50 miles per hour; personal watercraft capable of greater speeds may be written subject to insurer approval. (Although 45 mph may not seem very fast, operating a boat on water is similar to driving a car equipped with racing slicks on wet pavement. The water offers minimal resistance and so speeds are magnified.)

Additionally, the watercraft should be 20 years or less in age, and with a value not greater than $75,000.

Watercraft that do not meet this criterion may be eligible for another AAIS program; consult the individual insurer.

Certain types of boats are not eligible: amphibious vehicles, air powered boats, ice boats, and submersibles among them. For a complete list of ineligible boats, consult the insurer.

Underwriting Criteria

Although underwriting criteria may vary from insurer to insurer, there are some general points the underwriter will consider. First, the watercraft itself. Does it meet the eligibility criteria in regards to length, maximum speed, and value? What type of boat is it? For example, a flat bottomed bass boat with a 60 hp motor on it presents a greater exposure than does a boat with a modified v-hull. Although generally flat bottomed boats are not likely to tip, at a fast speed light weight bass boats react much like a stone being skipped across a pond. Any object in their way causes them to veer sharply.

Next, the underwriter will consider the operator(s) of the boat to be insured. How experienced is the operator? Has the operator taken any water safety courses such as those offered by the Coast Guard or Power Squadron? What does the operator's motor vehicle record reveal? If an operator is likely to drink and drive, the likelihood of drinking and boating is even greater. Has the operator had any previous boating losses?

Finally, the underwriter may consider where the boat is to be operated. Operating a pleasure boat on a crowded river subject to barge traffic involves skill and care, while operating the same boat on a large open lake may not require the same level of competence. The AAIS program recognizes five rating territories: South Atlantic and Gulf; North Atlantic; Great Lakes; Pacific; and Other Inland Waters. Each of these territories may be subject to its own hazards, and the underwriter will consider these when reviewing an application.

Policy Overview

The AAIS boatowners special form provides open perils property coverage for watercraft (including motors, boat trailers, and miscellaneous property), liability coverage, medical payments, and uninsured boaters coverage. Various terms and conditions round out the form.

AAIS boatowners policies may be written for a term of either one or three years. The term may be less than a year if the policy is written to coincide with common anniversary dates of the insured's other policies.

Rates are based on limits selected, type of property to be insured, and the navigational territory. The rates for the North Atlantic and Great Lakes are based on an eight month navigation period. The remainder of the year the boat should be out of the water or otherwise protected against freezing. Premiums are then modified based on the age of the boat, safety equipment, and the operator's completion of safety courses.

Insuring Agreement

This form, subject to all of its “terms”, provides the described coverages during the policy period. In return, “you” must pay the required premium. Each coverage described in this form applies only if a “limit” is shown on the “declarations” for that coverage.

“We” cover direct physical loss to: (1) “boats; (2) “motors”; and (3) “boat trailers” described on the declarations and for which a limit is shown.

Analysis

The property insuring agreement makes the point that the boatowners form is an open perils type policy (and, as is shown in the liability section of the policy, BT 0100 is also an occurrence type policy). The covered property consists of boats, motors, and boat trailers, all of which are defined terms.

Definitions