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Do you need boat insurance?

Summer is almost here, and millions of boaters are dreaming of long, lazy days traveling the nation's waterways.

However, every year serious boating accidents occur. In 2011, there were 4,588 recreational boating accidents that involved 758 deaths, 3,081 injuries and about $52 million of damage to property, according to the U.S. Coast Guard.

boat-insuranceBoat insurance can pay for costs associated with such incidents, says Lynne McChristian, Florida representative of the Insurance Information Institute (III).

"Everyone who owns a boat should consider insuring it," she says.

Types of boat insurance

There are two types of recreational boat insurance: Actual cash value and agreed amount value.

Actual cash value insurance reimburses you for the value of your boat, minus depreciation. If the boat is a total loss, your insurer will only pay out the amount the boat is currently worth, not the amount it would cost to replace it.

If the boat is still repairable, you receive a check for the total cost of repair, minus a percentage that corresponds to the depreciated value of the boat at the time of the accident.

On the other hand, agreed amount value insurance pays out the cost to replace the boat in the event of a total loss, or pays out the full repair amount.

The price of boat insurance depends on several factors, including:

Type and size of watercraft.

How and where it is used.

Value of the watercraft.

The cost of the policy also depends on who will be driving the boat, says Ron Moore, senior product consultant at MetLife.

"Most companies will rate and underwrite a boat policy on the age of the operators, similar to the way auto insurance is rated," Moore says.

Some types of damage might not be included in boat insurance, such as damage due to normal wear and tear, or damage caused by insects, animals and other organisms. Mold damage also may be excluded.

As with auto insurance, liability coverage is the most important part of a boat insurance policy. This insurance protects you from damages you inflict on others, whether through physical injuries or damage to their property.

Insurers typically offer boat insurance liability coverage limits of between $15,000 and $300,000, according to III.

Boat policy coverage specifics vary from insurer to insurer, says Elizabeth Stelzer, a spokeswoman for Nationwide.

"It’s important to read a policy fully to understand who is and who isn’t covered," she says.

For example, she says liability coverage typically extends beyond the policyholder to anyone operating the boat with the policyholder's permission. But other coverage – such as medical payments, which covers the medical and funeral costs for the insured after an accident – may only apply to the policyholder.

As with car insurance, many different types of boat insurance discounts are available. For instance, you may earn a price break for completing boater safety classes, such as those offered through the Coast Guard.

Does homeowner’s insurance cover your boat?

If you have a relatively small boat, your homeowner’s or renter’s insurance policy may offer some protection.

"There’s limited coverage for boats under a standard homeowner policy," McChristian says.

Most insurers will provide about $1,000 – or 10 percent of your home's value – in coverage for canoes, and small sail boats or power boats, according to III.

This coverage typically protects not only the boat, but also the motor and trailer.

However, some homeowner’s and renter’s policies don’t cover watercrafts at all, McChristian says.

In addition, liability protection for your boat typically isn’t provided as part of homeowner’s or renter’s coverage, or is very limited, she says. To get a sufficient amount of liability coverage, you need to add an endorsement, or to purchase a separate boat insurance policy.

Buying boat insurance especially makes sense if you have a bigger boat such as a yacht, or if your boat has more than 25 miles per hour of horsepower. Jet skis, wave runners and similar watercraft also may require separate coverage.

In some cases, you can pay extra for an endorsement to your home insurance policy that will provide additional coverage for your boat. But there may be limits.

For example, Moore says MetLife's boat insurance provides uninsured boaters coverage, which helps pay for damages associated with injuries that may occur if another boater runs into and hurts you, but doesn't have coverage. Homeowner’s insurance doesn’t provide this coverage for boats, Moore says.

How boat accidents affect auto insurance

Some people like to drink on their boats, and the consequences can be deadly. Alcohol was the leading contributor in 16 percent of fatal boating accidents in 2011, according to the Coast Guard.

Could a conviction for drunken boating affect your auto insurance rates?

"Yes, it’s possible," McChristian says. "It depends on how individual states handle boating under the influence."

She notes that it’s illegal to operate a boat under the influence of alcohol or drugs, just as it’s illegal to drive a car under the influence.

"The consequences vary by state and depend upon state regulations," she says.

Whether or not a boating accident affects your auto insurance depends on the insurer. Moore says that boat mishaps will not affect a MetLife policyholder's auto rates. However, Stelzer says a boating accident could impact a Nationwide policyholder's auto premiums.

To avoid that fate, customers can consider selecting accident forgiveness or minor violation forgiveness features in their auto policies, if these features are available.

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