E&O Insights: Insuring Personal Watercraft

Do Your Customers Know the Options?

It won’t be long before Mother Nature lets your customers know it’s time to get their boats out of storage and into the water. Other customers might decide it’s time to purchase that dream boat. Both of these scenarios will prompt contact with your agency to arrange the necessary coverage. When you are contacted, what will you provide?

Presuming the watercraft meets the criteria to go on a homeowners policy, is that the only option your customers will get, or will you look to provide the benefits of a separate watercraft policy? What are some of the differences?

The answers are important for the appropriate agency staff to know and understand, because your customers will look to you for your knowledge and expertise. How confident are you in your knowledge of the differences between insuring a watercraft on a homeowners policy versus a policy specifically designed for this exposure?

If you’re not too confident, this is the right time to do your homework so you are fully prepared when the calls start and a customer states: “I need coverage for my boat.”

Key Differences

If your customer is looking for coverage for physical damage? This is typically not provided under a homeowners policy; only liability protection is provided. With the price tag of these “toys,” this could be key.

What about coverage for injury to passengers and others? Once again, a separate watercraft policy is typically needed for this coverage.

To ensure your customers know the options available based on how they insure their boats, make them aware of the benefits of insuring a boat or yacht with a specialty carrier. The following coverages are automatically included or available for a fee with specialty carriers:

• Roadside assistance if the policyholder’s vehicle becomes disabled while towing the boat.
• Coverage for fishing equipment and other personal effects, such as water skis.
• Fuel spill coverage – your clients may be legally liable. Do they have the necessary coverage?
• Wreckage removal.
• Medical payments, even for water skiers.

Issues and Tips

There have been a number of errors and omissions claims involving this class of business. Among the issues:

• Territorial restrictions: This can involve specific territories, such as Cuba. In addition, some watercraft policies have limitations excluding coverage in certain types of water (fresh water versus salt water) or sizes of water (rivers and lakes compared to larger bodies of water such as the ocean).
• Lay-up period: Many policies will have a standard lay-up period, where the watercraft needs to be out of the water. Be sure your client is aware of the requirements.
• Physical damage coverage: Look to write the coverage, if possible, on an agreed-value basis. This is certainly broader than actual cash value.
• Insufficient limits: Major accidents happen. Provide limit options for your customer and look to schedule this policy under the umbrella with the necessary underlying limit.
• Liability: Provide the much broader P&I liability (protection and indemnity) protection as opposed to straight watercraft liability.
• Not understanding the binding guidelines relating to the age of the vessel: What are the specific survey requirements?

Other Tips to Consider

• Customer education: If you have a newsletter (paper or electronic), include a section regarding watercraft to help educate customers. The information must be accurate, so it is probably best to look to your specialty carriers for this information. It is also a great topic to include in your personal lines account reviews/questionnaires.
• The application: It is highly recommended that you sit down with the customer to review each question and to explain all of the coverages in detail. If the customer does not choose the broadest protection, get a sign-off for the coverages that were declined.
• Receipt of the policy: When your agency receives the policy, review it to ensure it provides the coverages requested by you and the customer. Then, when forwarding the policy to the customer, advise in a cover letter that the customer needs to review the policy to make sure everything is in order.
• Education and training: Your staff and your customers can benefit. Spend a few minutes, maybe at the next agency staff meeting, to discuss the coverage and non-coverage issues of insuring various types of watercraft. The goal is to be certain the staff understands all the coverages and how they apply before customers start calling. This is a good time to get “up to speed” and learn the “A to Z” of boat insurance.

At the end of the day, it is the customer’s decision about what coverages to secure. Yet, to make an educated decision, the customer must know the options. The discussion should go more smoothly if you notify the customer of the differences before a loss, as opposed to after it.

Topics Training Development Professional Liability