Buying a boat series [Part 4]
We found “our” boat, negotiated the price, conducted the marine survey, and now knew that we definitely wanted to move forward with purchasing it. We hoped to finance the purchase (more on that to come), which meant that we first needed to secure insurance. I work in the insurance field, and like to think I understand how insurance works… but marine insurance for a pleasure “Yacht” is a whole new ball game.
Starting the insurance search
I had read enough blogs to know that boat insurance would be pretty expensive, and there would definitely be limits on where we could or could not sail, and being inside the “hurricane belt” during hurricane season would be a hard sell. I had a list of insurance companies to consider and we got a few recommendations on insurance brokers to reach out to. I thought this would largely be a shop around and price things out exercise – maybe some creativity around deductibles and “extras.”
I was so, so wrong. There was no price comparing, because NO ONE wanted to insure us. That’s right – not even a here’s an outrageous premium quote, but just a flat out no. Why does no one want to insure us? We are well educated, responsible, and generally very cautious adults. We’ve done our research and completed our American Sailing Association certification courses so that we would be qualified to operate a boat such as we were purchasing. None of that mattered. Here’s what the insurance companies were looking for:
- Prior ownership of a vessel in similar size and operation for greater than 1 year with no insurance claims
- A lifelong history of owning and operating vessels of different sizes (e.g. a strong boating resume)
- Not living aboard
- Plans to be located within only a small area of the US
Really though, only the first point seemed to truly matter. This is our first “yacht” and they don’t want to insure us. All the recent hurricanes have had a huge impact on the market, which I totally understand. As I said to one of the brokers though, “last I checked, hurricanes aren’t selective in which boats they destroy.”
A boating resume
As mentioned in my list above, insurance companies want to see your boating resume when applying for insurance. A boating resume is exactly what it sounds like – a comprehensive list of your experience owning and operating boats. After a lot of asking around, and submitting a couple “incomplete” resumes, here’s what we feel should be included:
- Boat type and length
- Number of years owned and/or operator
- Approximate hours operated (5 years doesn’t mean much if you only operated it 2x a year)
- Literally every boat you’ve ever driven – weekend charter? Write it down.
Captain clause / sign-off
Ultimately, the first broker I reached out to was able to come up with one quote for us. It was of course outrageously priced, but even worse it had a bunch of contingencies. The one of primary concern was the dreaded “Captain’s Clause.” This essentially means that we are not allowed to operate our own boat (and be insured) unless there is a captain onboard in primary control of operations. Then once the captain feels that we are adequate to operate on our own, he submits a form to the insurance company who then decides whether or not we are allowed to begin operating on our own.
We thought that since we completed all of our certification classes just one year prior, which covered everything on the Captain Clause form plus so much more, that would be sufficient. It definitely was not.
This isn’t the end of the world, but makes it difficult when purchasing a boat across country that we don’t know when we will be aboard, and don’t know how many hours we’ll need a captain to be with us and when.
Additional searching
Several weeks after obtaining this first quote, we ended up switching finance brokers (more on that in Part 5 of our Buying a boat series). She looked at our insurance quote and told us that it would not be accepted by financing and thus we couldn’t obtain the loan (WTF?!). She suggested that we reach out to a different insurance broker that she works with closely and highly recommends – so we do. It seems like it’s going great, they are able to get us a quote that meets the loan requirements. We supplied our boating resume and yet the quote came back without a captain clause – amazing! We thought we were all set and only a couple days from finalizing the loan and taking ownership.
Things are never easy though. We went back and forth correcting silly (read stupid) errors that the brokers kept making on the insurance quote – and we definitely wanted to make sure that our contract was accurate and provided adequate coverage. Each time it took a day to get a new quote, read through it, and tell them once again what errors they forgot to correct. Then on about the last iteration, they came back with a Captain Clause including 40 hours of training time! At this point, I seeing red. That’s $4000 plus in fees to hire a captain for training, and now we are at the wire for getting insurance and closing the loan.
We went back to the first quote, worked with them to update it to the loan requirement standards and just moved forward. Yes it was expensive, yes there was a captain clause, but at least we had insurance (and thus could get our loan).
Additional costs
One thing that was conveniently left out of the insurance quote was a table of overages provided in case of damage to different items on the boat. Each one had a very hefty depreciation scale associated with it. Depending on the item, you basically got zero money for damage to things after they are 3-10 years old. Given that we were purchasing a 14 year old boat, with some original components – that didn’t seem like very useful insurance coverage.
No worries – you can pay an extra $2000+ dollars for the annual premium and have the depreciation scale removed. That’s “premier coverage.” Awesome, just take our money.
We are literally paying 2-3 times more in annual insurance premium than anyone else I have heard or talked to with a similar sized vessel, including 3 times what the prior owners of our vessel paid in 2018. It’s sickening, but at some point we had no choice. We’ll look to shop around and re-negotiate next year once we have a year’s history under our belts.
Stay tuned for the next post in our Buying a boat series for more fun with trying to finance a boat.
