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How to Insure & Finance Your Boat

Tags:  boat  | used boat | boat financing | boat insurance | marine insurance policyWrite a guide!

Simple advice can help you cut through the jargon and get the best insurance and financing for your boat.

Understand Marine Insurance

Understand Marine Insurance

As thousands of boaters discovered after four hurricanes battered Florida in a six-week period, the details of a marine insurance policy can make a huge difference in the eventual payout for damages. The hurricanes were estimated by the country’s largest boat owner’s association, BoatUS, to have caused about $680 million in damages to boats alone. While many boats were covered in full, some policy holders discovered to their dismay that the insurance check didn’t even cover the costs of salvage. Dozens of boats were stranded in canals and bayous because their owners couldn’t afford to have them towed — much less replaced.

“Boat insurance can get somewhat complicated,” says Mike Smith, president of Global Marine Insurance in Traverse City, Michigan. “Often, the romance of buying your boat overcomes the logic of what type of insurance you need. Many people don’t look into the details. But the time to understand your insurance is not when you’ve had a loss.”

“Options don’t vary that much in most car policies because they’re regulated. What’s covered is mostly the same across the board,” says Jim Nolan, vice president of underwriting at BoatUS. “Boat insurance is basically unregulated. The same loss may or may not be covered under different policies, and even when it’s covered, it may not be covered to the same degree from one company to the next.”

Read marine insurance policy details

Does your policy cover fuel spills? Will your coverage lapse if you run offshore? What happens if someone else is driving your boat and has an accident — does your policy cover you for liability? These are questions you need to ask before anything bad happens. The most important distinction, insurance experts agree, in any marine policy is “Agreed Value” vs. “Actual Cash Value.” The agreed-value policy, which commands a higher premium, covers the boat for its replacement value. “On a true agreed-value policy, the insurer will pay whatever it costs today to replace a partial or total loss,” says Nolan. The actual-cash-value policy, by contrast, factors in depreciation at about 10 percent per year.

“For what we spend for our boats, it’s just plain irresponsible not to have an agreed-value policy,” says John Canavan, an independent insurance agent. “There are some who will disagree because of the higher costs, but they’ll be the ones complaining if they ever have a catastrophe.” Canavan knows that firsthand: He recently sheared the drive off his Crownline on a rock. But he was also covered in full with his agreed-value policy. “Travelers took care of it, and we were up and running the next weekend,” he says.

“There are people who choose an actual-cash-value policy because they have boats that aren’t worth much, so the chance of having a big financial loss is minimal,” says Nolan. “But I like knowing exactly what I’m going to get back with the agreed-value policy.” Some owners dwell on the worst-case scenarios, figuring that if their boat sinks or catches fire, they’d rather have a new boat than an insurance check for only part of its value. But partial losses are much more common, according to Nolan.

The most common claim, he notes, is for damage to the outdrive. Under BoatUS’s agreed-value policy, Nolan says, the drive would either be replaced or rebuilt, minus the deductible. Under the actual-cash-value policy, you’d have to factor in the depreciation value of the outdrive, minus the deductible. If the drive’s 3 or 4 years old, that could add up to 30 or 40 percent of its value. Throw in the fact that new drives have increased in price over the years, and you could be shelling out much more than you’d expected. “Some policies don’t cover ’external machinery’,” Nolan says, “That could be interpreted as your outboard’s drive.” Other policies, he adds, might have a clause that stipulates that the boat must be “seaworthy under normal wind, wave and weather” conditions. “They’re trying to exclude improperly maintained boats,” he says. “But let’s just say your boat’s at the dock, and a hose gets chafed or a bilge pump fails, and the boat sinks. A clause like that can exclude coverage.” With marine insurance, the devil is always in the details.

Choose a marine insurance company

Many owners wonder whether they should insure the boat with a marine specialty provider like BoatUS or a marine insurance agency like Smith’s, or use the one-stop-shopping approach a homeowner’s policy provides. That same question posted on Crownline’s owner’s website elicited a variety of replies on how to handle it. “We insure everything through State Farm,” Kris Hartman wrote. “It’s easier to deal with one insurance company.”

Hartman said earlier this year her family put in a $10,000 claim to State Farm for outdrive damage. “It was complicated because the damage was done in one state, I live in another, and the repairs were made in a third,” says Hartman. “They went through the entire claim process and then transferred it to Texas, where it was repaired. We basically had to start over.” Despite the wait, Hartman says State Farm was “generous” about the claim and replaced the drive with a new one, except for the prop, which was repaired.

Mike O’Neil echoed his good experience with State Farm for an outdrive engine replacement, and later for a $1,000 gelcoat repair to his Crownline 225: “No problem, no hassles with them ever.” Other kudos were heard for Allstate, USAA, Travelers and United Marine Underwriters. But other Crownline owners say they prefer dealing with marine specialty insurers. “I thought it would be better to have an insurer that is more familiar with the marine world than one with autos or homes,” wrote Rick Olson.

Besides the national mainstream insurers, Canavan says that finding an independent agent who knows about marine insurance can be a “hit or miss” proposition. “Our agency does not specialize in boating policies, but I know quite a bit about it because I’m a boater,” he says. “Other guys in my office don’t know a thing.”

Still, an independent agency may have something of an edge over the national companies because it can shop around to different underwriters for more diverse policies at competitive rates for boat owners. That edge may be even sharper if the agency only deals with marine insurance.

Global’s Smith notes that a good marine insurer understands all the “fine details” in a comprehensive marine policy. He says that there are significant differences between a true “yacht policy,” which has been derived from traditional Lloyds of London policies. A yacht policy has many technical provisions that might not apply to small-boat owners, but it also guarantees “protection and indemnity” for circumstances like boat salvage — something many Florida boaters may have learned the hard way. A “regular boat policy,” by contrast, may charge the costs of salvage against your stated amount of coverage, and that may eat up any replacement money.

“Our policy and most marine policies have separate pools of money for repairing and salvaging the boat,” notes Nolan, who adds that some homeowner’s policies also limit salvage amounts to 10 percent of its overall value. That, he says, left many Florida boaters “high and dry” in mangroves after the hurricanes. Other policies can exclude damage from lightning, freezing, boating outside continental waters, trailering the boat outside your region, and personal property coverage.

Determine what a marine insurance policy actually covers

Beyond the agreed-value vs. actual-cash-value debate, it’s vital to determine what else the policy covers. An agreed-value policy this writer bought recently from BoatUS, for instance, included $100,000 in boating liability coverage, $1,000 medical payments per person for each accident, $100,000 in uninsured boater protection, and $500,000 in fuel and other spill protection. The policy also covered the trailer, but with a $50 deductible. Each company varies on the amount of specific payments, so again, check out the details.

“Every policy is different,” says Nolan. “It’s hard to compare apples to apples.” But a good agency, says Smith, should be able to do a line-by-line comparison to determine which policy is best for your particular situation. “You should always talk with the agent on the phone and make sure you get a quote in writing,” he adds.

Smith warns that there are many “slippery people” in the insurance business, so it’s typically better to go with a highly respected carrier or agent. Boaters can also check an agent’s credentials with the state department of insurance, and Smith also recommends calling the Better Business Bureau (BBB) to research complaints. “We’re licensed in 48 states,” says Smith. “But the field is so unregulated you really need to make sure you’re dealing with a reputable agency.” They’ll not only help you with the gory details, but give you the balance of protection and cost-savings that your boat deserves.

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Float Your Boat

Float Your Boat

Given the variety of payment plans, financing your boat can seem somewhat confusing. But there are a few ways to streamline the process, and ensure that you’re in good hands.

“First and foremost, always look for a bank that specializes in boat loans,” says Kenneth Landon, CEO of Key Recreation Lending, a division of KeyBank. “They’ll be able to make sure that the documentation, title insurance and other details are correct, and will try to get you the right loan and the best rate for your situation.”

The National Marine Bankers Association (NMBA) has a list of marine bankers, broken down by state, at www.marinebankers.org. You can also typically get financing through your boat dealer or online at sites like www.eboatloans.com. Landon says that up to 15 percent of his bank’s loan business is now done via e-commerce.

Most sophisticated marine lenders should be able to process your application within a matter of hours. If pre-approved, you may be asked by the lender to verify more information through wage statements or tax returns.

Boat loans are structured differently. There are typical monthly payment plans. But if you tend to be paid seasonally, there are plans that structure the loan for a nine-month period, effectively skipping three months each year. There are also annual payment plans for those who get a large annual bonus. Both fixed and adjustable rates are available, often with 15- and 20-year terms. The boat may also qualify as a second home for purposes of deducting interest on your taxes.

Typically, closing costs involve processing and underwriting fees, appraisal fees, the cost of a credit report, tax service fee, application fee and other administrative fees. “People getting a boat loan should be wary of anyone who wants to charge ‘points’ as a fee like they often do in real estate,” says Landon. “Closing costs should be well less than $1,000 and probably more like $500 for a normal loan.”

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Find Boats on eBay Motors

Find Boats on eBay Motors

Once you know what boat make and model you want, go to eBay Motors, click the Boats link under Other Vehicles, and start shopping on eBay!

  • Categories: Select the type of boat you want from the list of Categories. You can choose from Fishing Boats, Powerboats & Motorboats, Sailboats, and more. Subsequent Categories lists on the left side of listings pages will help you narrow your options further.

  • Product Finder: Drop-down menus on the Power & Fishing Boats Finder and Sailboats Finder, found on the left navigation bar, allow you to narrow listings by boat type and length.

  • Search: Search eBay listing titles for specific words by entering keyword terms into eBay's Search box or use the Advanced Search feature on eBay Motors. The search items by eBay Motors Category option allows you to specify item location by distance in miles or ZIP code.

  • Compare: Mark the checkbox next to each boat item listing that interests you. Click the Compare button to view listing and product details side-by-side.

If you can't find exactly what you want, try shopping eBay Stores, tell the eBay Community what you want by creating a post on Want It Now, or save a search on My eBay and eBay will email you when a match becomes available.

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Buy Boats With Confidence

Buy Boats With Confidence

Hundreds of boats on eBay Motors will likely interest you. When trying to select the right boat, get to know exactly what you're buying, research the seller, and understand how eBay and PayPal protect you.

Know your purchase

Many sellers put a lot of time into creating their listings, making an effort to ensure they include all the information buyers need. Carefully read the details in listings for the boat(s) you consider buying and carefully review available photos. Before placing a bid or buying an item, be sure to:

  • Have all your questions answered. If you still have questions after reading the listing and reviewing the photos, contact the seller using the Ask seller a question link in the “Seller information” box in the top right corner of every boat listing. Also request additional photos if you want to see the boat from a particular angle that isn’t shown in the photos included in the listing. If you have more questions than you can address in email, get the seller’s phone number and give him/her a call. Some boat sellers even include their phone number so you can call them directly. Just remember that you need to actually bid and buy on eBay in order to be covered by eBay and PayPal protection programs (see "Buyer protection" below for more details).

  • Get delivery details. Calculate and include delivery costs into your final price. This may simply be the cost of driving across the city or state if the boat is close-by or it may mean working with a shipping company that can transport the boat from anywhere in the country. To learn more about shipping costs, ask the seller or contact DAS, an eBay Motors-approved vehicle shipping service.

  • Complete your transaction on eBay. Always complete your transaction on eBay (with a bid, Buy It Now, or Best Offer). Transactions conducted outside of eBay are not covered by eBay and PayPal protection programs (see "Buyer protection" below for more details).

  • Know your payment options. eBay, together with several top lenders, can help you get financing. Visit the eBay Financing Center to arrange financing before you bid or after you buy or to calculate monthly payments — select "Other (make selections below)" as your vehicle type and choose Boats from the Other pull-down menu. Never pay for your eBay item using instant cash wire transfer services such as Western Union or MoneyGram. These payment methods are unsafe when paying someone you do not know. Instead, pay with PayPal for amounts less than $2,000 (including deposits), a money order, or direct bank-to-bank fund transfer.

  • Track items with eBay Toolbar. Use the free eBay Toolbar to track items you bid on and watch. It includes Account Guard, a feature that indicates when you're visiting a verified eBay or PayPal website and warns you when you enter your eBay password into an unverified site, even if it looks like eBay or PayPal.

Know your seller

Just as important as researching your boat purchase is getting to know the seller. Take time to research the seller so that you can feel positive and secure about every transaction. Key things to look for when evaluating a seller are:

  • Positive Feedback. What is the seller's Feedback rating? How many transactions have they completed? What percentage of positive responses do they have? What do buyers and sellers say in their Feedback? Did the seller receive praise?

  • Sales history. Find out how long the seller has been a registered eBay user and look at the types of items a seller typically sells. It’s okay to buy a boat from a seller who hasn’t sold one before — many of the boat listings on eBay are from individuals selling their own boat. If the seller’s feedback seems low, take the time to look at the Feedback details; sometimes a seller's Feedback looks low until you realize that they’re a boat dealer and their Feedback count comes entirely from boat sales.

  • Terms and conditions. What are the terms and conditions of the sale? Are the terms agreeable to you? Sellers typically set terms and conditions, but you should make sure you agree with them. If not, find another seller/boat or contact the seller to find out if he/she is open to your suggestions.

  • Good communication. Once you’ve initiated communications with the seller, how is he/she communicating with you? Is the seller courteous and professional? Is the seller responsive? Once you bid on a big-ticket item such as a boat, communicate with the seller through My Messages in My eBay. All legitimate Second Chance Offer messages will come through My Messages and not to your email address alone. Always contact the seller before accepting a Second Chance Offer, and never respond to any request to send money via Western Union or other instant cash transfer service.

eBay Vehicle Purchase Protection

Vehicles purchased through eBay may be covered against fraud and material misrepresentation with eBay Vehicle Purchase Protection. For more details, please check the terms and conditions here.

Introduction, "Understand Marine Insurance," and "Float Your Boat" were provided by Boating World. © 2006 Trans World Publishing, Inc. All rights reserved.

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