The Ins and Outs of Commercial and Charter Boat Insurance

Posted in Legal Alerts on June 17, 2022

Boats are used commercially for many reasons. Some owners will allow their boat to be chartered, often for a day out on the water or as a fishing boat. Others may use commercial boats for transport or to move cargo. Either way, boat accidents can result in significant liability for the owner when an accident causes injuries to passengers, damage to other boats, or the loss of cargo. Major insurance companies offer commercial boat insurance that protects boat owners if there is an accident.

In addition, the boat owner may be liable for injuries to the crew in an accident. Unlike workers’ compensation law, the Jones Act allows injured employees to sue an employer for negligence when their injuries occur on a in service of a vessel in navigation. Thus, it is crucial for employers to be protected. Otherwise, one major accident could threaten their entire business. Many employers opt for additional insurance coverage as part of their overall charter boat insurance.

Even though some of the coverages are different, charter boat insurance works practically the same as any other type of insurance. An underwriter will price the policy based on the factors listed below. If the boat owner suffers any kind of damage or loss, a claims adjuster will investigate the accident. The insurance company will decide whether the loss is covered by the policy. If the damage is covered, the insurance company will make an offer to resolve the claim.

How Charter and Commercial Boats Suffer Losses

There are many ways that boats, their passengers, and/or their cargo can be harmed, including:

  • Adverse weather and storms (boats are often damaged in severe Florida storms when they are not in storage)
  • Passenger accidents and drowning
  • Vandalism
  • Navigation equipment damage
  • Collisions

The Different Types of Charter Boat Coverage

A policyholder should work with an insurance company to customize their coverage to meet their needs. Businesses may need various components of insurance coverage to protect themselves.

Commercial boat insurance policies can include the following types of coverage: 

  • Marine liability insurance - covers damage to another boat or bodily injury to third parties in the event of an accident
  • Hull coverage - is similar to auto insurance coverage, protecting the boat itself and all attached equipment that is damaged in an accident
  • Marine cargo insurance - covers damage to cargo that a boat is carrying
  • Pollution liability - covers boat owners who are legally responsible for removing the wreckage if their boat sinks, and are liable if any hazardous materials leak from the boat
  • Uninsured boater coverage - protects the boat owner in the event of an accident with an uninsured boat
  • Personal property - pays for any equipment or property on the boat at the time of the accident or damage 

These are just some of the commercial and charter boat insurance options available. Boat owners may need additional types of coverage depending on their business and their reason for using a boat. For example, if a passenger is injured in a boat accident, they may have significant medical costs both now and in the future. Their own health insurance policy may not cover these costs – or may seek reimbursement for them – if there is another party responsible for the injuries.

Agreed Value vs. Actual Cash Value Coverage

When it comes to the actual coverage for physical damage to a boat, there is a key distinction in types of coverage. The first type of policy is for an agreed value of the boat. If the boat is a total loss, the policyholder and insurer have agreed ahead of time on the value that will be paid if the vessel is lost or destroyed based on the replacement cost. The price of the coverage will reflect this value.

The second type of coverage is actual cash value. This policy will pay the value of the boat at the time of the loss. This amount of coverage is usually less than an agreed value policy, but it will also cost less. 

Not every charter boat insurance policy will cover damages when a boat has been leased or rented out to someone else. Insurance companies may not want to take that risk on as part of a standard insurance policy when they do not know who is chartering the boat. Some insurance policies may include this coverage at a price. Otherwise, the person who is renting or chartering the boat should have their own insurance coverage.

How Underwriters Price Charter and Commercial Boat Insurance 

The pricing of charter and commercial boat insurance will vary based on a number of factors, including: 

  • The age of the boat
  • The size of the boat and the number of passengers
  • The experience and safety record of the company
  • The specifications of the boat
  • The amount and types of coverage that the policyholder needs 

Boat owners and insurance companies can further customize a policy with the addition of certain riders. At the same time, the insurance policy will contain terms and conditions along with some exclusions of coverage. Boat owners may not have blanket coverage for any type of accident if they are only insured for certain purposes. When that’s the case, owners would still need to ensure their boat is properly maintained and kept in seaworthy condition.  

The cost of charter boat insurance can be affected by the time of year the boat is in use. For example, if the boat is in storage or moored for a large part of the year, the policyholder may get a discount for the time the boat is not in service.

Would-be policyholders should speak with a number of insurance companies to get an idea of available coverage and the pricing of policies. Accident liability can be significant, so boat owners should make sure they are well-protected by their policies.