Watercraft Insurance: What it is and how it works

Key takeaways

• Watercraft insurance covers boats, yachts, and personal watercraft against physical damage, theft, and liability.
• The type and cost of coverage depend on vessel size, value, use, and navigational territory.
• Policies may pay actual cash value (ACV) or agreed value (AV); AV is generally better for newer or high-value vessels.
• Lenders and marinas often require insurance even when states do not.

What is watercraft insurance?

Watercraft insurance is a category of policies that protect motorized vessels and recreational watercraft from financial losses related to damage, theft, and third-party liability. It typically includes three main subtypes:
* Boat insurance — for most pleasure craft under about 27–30 feet (definitions vary).
* Yacht insurance — for larger, higher-value vessels that travel farther and face greater exposures.
* Personal watercraft insurance — for Jet Skis, Sea-Doos, WaveRunners and similar surface-skimming craft.

How it works

As with other insurance, you pay premiums in exchange for coverage of specified risks. Premiums reflect vessel size and value, age, intended use, your claims history, and where and how you operate the craft. Policies contain limits, deductibles, and exclusions that determine how losses are paid.

Typical coverages

• Physical damage — collision, striking submerged objects, vandalism, wind, lightning.
• Theft — loss of vessel or equipment.
• Liability — property damage or bodily injury to others; legal defense costs.
• Medical payments — limited coverage for passengers and owner/family.
• On-water towing and assistance — emergency towing after a breakdown or grounding.
• Additional options — personal effects, fuel spill liability, hurricane haul-out, ice and freeze coverage, trailer and accessory coverage.

Boat insurance — practical details

• Small craft such as canoes or low-speed powerboats may have some protection under a homeowners or renters policy, but those policies rarely include adequate liability coverage.
• Deductibles and coverage limits vary by policy. Confirm whether your policy pays ACV (depreciated value) or AV (agreed value) in a total-loss scenario.
• Common policy features to review:
• Lay-up period — protection while the boat is stored off-season.
• Navigational territory — geographic operating limits for coverage.
• Property damage to others — damage your boat causes to someone else’s property.
• Personal effects — coverage for onboard equipment (fishing gear, electronics).
• Fuel spill liability and ice/freeze protections.

Yacht insurance — specialized coverage

Yacht policies are broader and more specialized because of higher values and longer voyages. Key points:
* Deductibles are often expressed as a percentage of insured value (e.g., 1%–2%).
* Common exclusions include wear and tear, gradual deterioration, manufacturer defects, animal damage, and certain marine-specific issues like osmosis and electrolysis.
* Two primary components:
* Hull insurance — all-risk, direct damage coverage often paid on an agreed-value basis for total losses; partial-loss replacement-cost options may be available.
* Protection & Indemnity (P&I) — extensive liability coverage tailored to maritime exposures, including crew-related liabilities (Jones Act) and defense in admiralty courts. P&I can cover judgments, legal defense, and claims involving longshore or harbor workers.

Personal watercraft insurance

• Designed for recreational vehicles such as Jet Skis and WaveRunners, which are typically not well-covered by homeowners policies.
• Common coverages:
• Liability for bodily injury and property damage to others.
• Theft and towing after an accident.
• Medical payments and legal defense costs.
• Available add-ons include trailer and accessory coverage; multi-craft discounts may apply when bundling policies.
• Because personal watercraft are involved in many accidents and injuries, liability protection is a key reason to carry this insurance.

Geographic limits

Policies frequently limit the geographic area where coverage applies (e.g., inland lakes, rivers, and ocean waters within a set number of miles from shore). Always check navigational territory and any transit or cruising limits before traveling beyond specified areas.

Do you need it?

• Only a few states mandate boat insurance, but lenders and marinas often require it as a condition of loans or mooring/rental agreements.
• Regardless of legal requirements, insurance is prudent because liability and legal defense costs from an accident can exceed the cost of premiums.
• Even low-value craft can expose owners to significant liability risk.

How to choose and manage coverage

• Compare multiple insurers and policies — coverage terms and exclusions vary widely.
• Confirm whether the policy uses ACV or AV and choose AV for newer/high-value vessels when feasible.
• Review and adjust deductibles and liability limits to balance premium cost and out-of-pocket risk.
• Consider add-ons based on your risks: towing, hurricane haul-out, fuel spill, personal effects, trailer coverage.
• Verify navigational limits, lay-up provisions, and any seasonal storage requirements.
• Bundle policies (home, auto, multiple vessels) when possible to reduce cost.

Conclusion

Watercraft insurance protects against costly physical damage and liability exposures unique to boating. Select coverage based on your vessel type, value, operating area, and risk tolerance. Carefully review policy details and compare providers to make sure the limits, deductibles, and exclusions meet your needs.