Boat owners tend to underinsure themselves in two quiet ways, according to Amanda Conely (pictured), an insurance broker at Mitch Insurance – carrying liability limits that marine claims can blow through, and never checking how their policy will value the boat itself after a loss. Both, she said, tend to surface only when it is too late to fix them.
The liability gap is the one Conely considers most serious, because the exposure is larger and less predictable than owners assume. Marine liability does not work the way auto liability does. "When an owner is at fault, they face massive exposure, because marine liability is structurally different and often far more legally complex than auto insurance liability," she said. There is no on-water equivalent of the rules that make road claims relatively quick to settle. "It's not as cut and dry as auto insurance, where you have the Highway Traffic Act and the at-fault accident rules," Conely said. "There are no dedicated lanes in the water."
That complexity makes marine claims slower and more expensive to resolve, she said, because fault itself is harder to establish. Assessing at-fault rules on the water takes more time, and that time costs more money, which is part of why a limit that looks adequate on paper often is not.
The exposure is also broader than most owners picture. It is not limited to colliding with another boat, Conely said – even taking a wake too hard and causing a passenger's spinal injury can put an owner on the hook. In a serious incident, she said, the owner is personally liable for the medical costs, lost wages, and pain and suffering that follow. Against that scope of potential loss, the limit many owners carry falls short. "Many owners rely on basic one-million liability coverage, which is not enough when you consider the scope of damage and injuries that could be caused," Conely said.
Her recommendation is to carry considerably more, either directly or through an umbrella policy. "I would probably recommend that most people carry at least $3 million liability," Conely said, "or have an umbrella liability coverage that increases their liability across all of their items." The figure is not arbitrary, she said – it tracks where the market itself is moving. "Most insurers are moving towards that number as the baseline," she said, with a growing share treating $3 million as a minimum. When specialty marine insurers converge on a figure, she added, there is usually a reason behind it.
The second gap is about the boat rather than the liability – and it can quietly downgrade itself over time without the owner noticing. Conely said many owners assume a total loss will simply buy them a new boat, without grasping the distinction that determines the payout.
"They mistakenly believe that their policy will automatically buy them a brand new boat if theirs sinks," she said, "but they may be ignoring the massive distinction between agreed and actual cash value."
The two settlement bases produce very different cheques. Under an agreed-value policy, Conely said, the insurer commits to a locked-in amount in the event of a total loss, regardless of depreciation. Actual cash value works differently: the insurer pays the boat's market value at the time of the loss, with depreciation and wear and tear factored in. The gap between the two, she said, can be substantial.
What makes it a trap rather than just a choice is that the basis can switch automatically as a boat ages. "Boat age is what dictates what the boat insurer will offer in terms of coverage," Conely said. Many policies convert from agreed value to actual cash value once a vessel reaches roughly 10 to 15 years, she said, or require a fresh marine survey to keep the higher basis – and an owner who misses the change is left worse off at claim time. "If they don't catch this change, or if they don't catch this when they sign up for a policy, they'll get a lesser check than they would expect if they were to have a claim."
Guarding against both gaps, Conely said, comes down to reviewing coverage before the season rather than after a loss. A professional survey is not needed every year; a bill of sale and standard valuation guides set the baseline. Where market values are rising and an owner wants to lift an agreed value, she said, the case can be made with documentation.
“You can speak with your broker, provide documentation of any recent upgrades," Conely said. "You can provide local listings of other identical-type boats, just to justify the reason why you want to raise that locked-in number. It's really about taking a proactive approach before the season starts."
