Shopping for first "practice boat" (homing in on an older, but really nice condition, Gulfstar 43' Mk II), and having my first conversations with yacht insurance people.
I have a lot of questions, but I want to focus on the liability-related ones for this Thread:
1. What do y'all think about "liability only" for a boat with a hull value of less than $50K? It will be co-owned with another couple, so our maximum exposure from a complete loss is $25K per couple, which would hurt, for sure, but wouldn't derail the retirement train if it happened. (1/2 of the premium for the best quote we got was for liability, the other 1/2 for hull coverage: $1,100 each, for a total of $2,200.)
2. How much liability coverage is enough? I know that's VERY subjective, but I'd love to gather opinions and the reasoning behind the opinions.
Thanks!
Brian
Brian. First, I'd shop the insurance market. However, don't just shop price. Find out what they are covering. Do they include salvage? What about named storms?
But then after saying that I'm finding a disturbing portion of your post and want to try to address this without sounding rude. I'm bothered that you're already looking for short cuts. Not having comprehensive insurance including hull coverage. How little liability. Compared to just the initial work you'll need to do on a $50,000 boat to get it ready and the annual maintenance on one, this is just a small part.
As others have said, just because the value of the boat is $50,000 and you're only half owner, doesn't mean you're limited to $25,000 exposure. The cost of salvaging the boat and cleaning any environmental damage could be several times that and salvage is part of the hull coverage, not the liability coverage.
As to liability, what kind of liability do you have on cars? Plane? What has your attorney advised you to have? I'd recommend as someone else did $300,000 minimum with an umbrella for a couple million. But the umbrella should be part of your whole insurance plan.
I can only say I wouldn't short cut insurance. Now one thing I would say is look at the deductible. I do believe in fairly large deductibles if one can afford the loss. But even there in a partnership situation you run risks. What if you got a $5,000 deductible but your partner wasn't prepared to pay his $2500 portion right then?
What is the age of the boat? That does impact insurability and cost greatly.
Now someone mentioned LLC's in a rather harsh way as weaseling out of blame. I can say without question if I was buying a boat in a partnership situation I'd want an LLC. You're not just talking about your own causes but those of another. And, I don't think it's fair to describe LLC's as weaseling out of blame. They are a means of protecting against some of the extreme litigation that one can face. In this case, let's say his partner runs into another boat causing the loss of a life. The suit could easily be $20 million and as co-owner of the boat he would be fully liable. A million dollars of liability coverage can come up way short.
LLC's also provide limited protection against one's actions and accountability. If I'm out operating a boat that is owned by my LLC, I can still be held accountable for my personal actions as operator.
I wish it wasn't necessary to put certain things into LLC's or Corporations. But to imply that one who does is dishonest isn't appropriate. And again in any co-ownership I absolutely would. It's going to require a partnership anyway so why wouldn't one go LLC?
Ultimately the insuring of a boat should fit in with your entire insurance profile. But under insuring especially when in a partnership could be very dangerous.