boat insurance depreciated repairs

[keith c]

Just got my new boat policy. The rate went up 50% and as I read the policy language any repairs done will be subject to a reduction for depreciation. My vessel is 17 years old! My agent called the carriers claims department and confirmed my fears ! Is this something new to boat insurance? Am I misreading the policy? Am I correct that my only real coverage may be the ACV if the boat is totaled?

 

[rslifkin]

It depends on the policy. Some are written as yours are, some are not. Sometimes it also depends on the part being repaired. If it's considered a wear item, it's more likely to be subject to depreciation than if it's something like a hull repair after an incident (where the item being repaired would be expected to last indefinitely rather than possibly being 50% worn out before the incident).

 

[garmstro55]

Just got my new boat policy. The rate went up 50% and as I read the policy language any repairs done will be subject to a reduction for depreciation. My vessel is 17 years old! My agent called the carriers claims department and confirmed my fears ! Is this something new to boat insurance? Am I misreading the policy? Am I correct that my only real coverage may be the ACV if the boat is totaled?

That’s pretty standard for a boat over 10 years old. Some carriers will offer “agreed value” but it does usually cost a lot more and you may not qualify if the boat is older than the carrier’s threshold.

 

[Comodave]

That’s pretty standard for a boat over 10 years old. Some carriers will offer “agreed value” but it does usually cost a lot more and you may not qualify if the boat is older than the carrier’s threshold.

I think the agreed value is the event of total loss. The depreciation comes in for partial losses and caps the parts reimbursement. And saves the insurance company money, what a surprise…

 

[mvweebles]

I would probe further, especially if you have older equilament. There are depreciation schedules out there designed to write-down assets. A PC has a depreciate life of 3 years. Major equipment might be 20 years. If that's the methodology an insurance company uses, entirely possible then have zero liability because the net asset value is zero. It's not unfair, but could be an enormous surprise.

I would ask how they determine depreciated value for different types of gear. And include it as an addendum.

Peter

 

[Comodave]

As in 40 year old diesels have almost no value??? I would argue that they can still do the job they were intended to do.

 

[mvweebles]

This is pretty simple - depreciated value vs replacement cost. Just need to ask how they determine depreciated value. Yes, a 30 year old diesel can have zero value because it has been completely depreciated over its life so although it's running strong at 40 years, it has zero depreciated value. Or if it hasn't been depreciated, than some sort of schedule.

I'm not saying thats the methodology insurance comoanies use, but it's one method that comes to mind. Just need to understand what you're buying when the insurance company states they will depreciate an insurable asset vs replacement value. There's nothing wrong with this, but could be a surprise if you're expecting replacement cost. As long as both parties agree, could be a way to obtain reasonable cost insurance for an older boat.

I'm somewhat knowledgeable in asset depreciation schedules and valuation. I'm not knowledgeable in insurance. Hopefully someone will chime in who is. But let's ne clear - if the owner of a 40 year old boat expects a repair as new for no cost, that's a tough insurance ask.

Peter

 

[O C Diver]

This raises an interesting question. What is the value they are starting from? Is it replacement value, original purchase price, survey value (whenever that was done last), some book value, policy value, or some number that came off the Ouija board? There's no point in having hull insurance if the total loss and repair value isn't completely understood.

Ted

 

[psneeld]

Isn't the basic concept of insurance just to "make you whole"?

So if they have to replace a 40 yr old engine..... they pay what it is worth and the cost to get/install it. Not a new engine.

If the only option is to replace with a new engine worth 10 times what your old engine is worth, who should bear the cost? I would guess that it can be handled as many policies are that if you want to pay the premiums of a new engine instead of an old one...fine and they may agree to it (likely not though).

With the replace no matter what mentality, then in a total loss, that would be the equivalent of replacing a 40 year old boat with a brand new one. With that, one shouldn't be surprised in paying premiums that match the cost of a 3/4 million dollar boat versus a $100,000 boat.

 

[rslifkin]

Isn't the basic concept of insurance just to "make you whole"?

So if they have to replace a 40 yr old engine..... they pay what it is worth and the cost to get/install it. Not a new engine.

If the only option is to replace with a new engine worth 10 times what your old engine is worth, who should bear the cost? I would guess that it can be handled as many policies are that if you want to pay the premiums of a new engine instead of an old one...fine and they may agree to it (likely not though).

With the replace no matter what mentality, then in a total loss, that would be the equivalent of replacing a 40 year old boat with a brand new one. With that, one shouldn't be surprised in paying premiums that match the cost of a 3/4 million dollar boat versus a $100,000 boat.

Exactly. And in the engine example, it's a wear item, so I'd expect that replacing a 40 year old engine might pay for a used or rebuilt version of the same engine, but not a new engine.

Similarly, I'd expect a payout on damaged electronics to cover replacement in kind. If they're a year or 2 old, that means buying a new one. And for electrical components where the same model is in production, and there's not really a lifespan unless it fails, then maybe they should cover a new one rather than used. But if they're something that becomes functionally obsolete over time like a chartplotter, I'd expect the payout to cover me getting on ebay and buying a used one of the same model, not upgrading to the new version.

For hull damage, I'd expect a reasonable policy to cover repair to as-built condition, as there's not really a set lifespan for the hull. As long as it's maintained, it should remain in good condition nearly indefinitely on a fiberglass boat, just maybe not quite as cosmetically nice. So maybe the repaired area will be shinier (and I wouldn't expect anything to be done to the non-repaired area to make it match), but the payout should cover repairing the damaged area to as it was built.

 

[mvweebles]

I've had exactly one insurance claim. Over 30 years ago a gal and I bought a 18 year old Uniflite 42 in Newport Beach and had a delivery skipper bring it north. It had a heavy wood bow/anchor platform that the previous owner had hinged to reduce length and dock costs. In heavy head seas, the platform broke and the semi-free anchor did considerable damage to the stem. The yard that did the repair made a beautiful reinforced fiberglass platform that was significantly better than even the pre-hinged version. Insurance covered it all. Different times I suppose.

I have to wonder what effect "depreciated value" would have on that claim, if any.

Thoughts?

Peter

 

[psneeld]

I've had exactly one insurance claim. Over 30 years ago a gal and I bought a 18 year old Uniflite 42 in Newport Beach and had a delivery skipper bring it north. It had a heavy wood bow/anchor platform that the previous owner had hinged to reduce length and dock costs. In heavy head seas, the platform broke and the semi-free anchor did considerable damage to the stem. The yard that did the repair made a beautiful reinforced fiberglass platform that was significantly better than even the pre-hinged version. Insurance covered it all. Different times I suppose.

I have to wonder what effect "depreciated value" would have on that claim, if any.

Thoughts?

Peter

Or different policy wording rather than different time (maybe a bit of both).

 

[PPandE]

Timely article on just this subject:

“Insurer Faces Class Action for Depreciating Labor in Actual Cash Value Payments“

https://www.insurancejournal.com/news/national/2023/02/16/708211.htm

I currently have a claim making its way through the labyrinth with an agreed value policy that specifies depreciation for various components, 15% per year, never to exceed 70%. 50% max on masts or spars, 25% max on props and shafts. There are other terms but labor is not mentioned.

 

[PPandE]

My policy states that depreciation for Diesel inboards and running gear starts at 10years of age and is 15% per year and will not exceed 70%. Again, Labor to replace the engine is not mentioned so I will assume it is not depreciated at all.

 

[Larry M]

A few years ago I asked our agent, who managed our policy via Geico, about a depreciating waiver for our Kady Krogen 42. I have no idea if they still offer it but here’s his/her reply:

They now have a “Partial Waiver of Depreciation” endorsement that can be added to your policy at renewal. I have attached a copy for you to look over. The additional premium for this endorsement is about $25.00 per year. With this endorsement, Geico will not deduct depreciation for repair or replacement of the following:
a. Fiberglass, plastic or wood hull materials;
b. Mast and spars;
c. Metal supports and framing for attached towers, T-tops and hard tops;
d. Bow, stern or deck railings; and
e. Glass

 

[Nepidae]

Insurance policy

You didn't mention which insurance company you got your quote from and BTW, it might have gone up because your broker got a bigger cut???

I got a policy back in '10 when we bought our boat from BoatUS. I called them and an inhouse person went through the steps and issued the policy.

Later, as a member of the MTOA (Marine Trawler Owners Association), they had an insurance individual add special items to a special MTOA BoatUS policy that the insurance guy had put together and was later picked up by GEICO. I had those 'special' items put in my policy with a phone call.

GEICO did away with the brokerage offices but my policy was never touched because my policy was an inhouse BoatUS policy.

Costs for the policy haven't changed much.

The boat is in FL and sustained some damage from hurricane Ian.

GEICO told me that they would put the boat back to where it was before the hurricane. We lost a bridge roof, 3 flex solar panels and 6 L16 AGM batteries due to the hurricane (as well as some other damage) and GEICO has sent me paperwork that the parts and labor would be covered. No depreciation but they did have a 'named storm' deduction that could be looked at as a depreciation coverage.

I am please as how our situation worked out.

My only complaint with GEICO is that I wanted to raise my coverage after I had a survey done and for our '86 Albin Sundeck and they wouldn't do that.

Go online to BoatUS and get a quote on your boat. See how that works out.

Good luck.