To the OP: What "loopholes" are you talking about? An insurance policy is a
contract. If you comply with the policy terms, the insurance company is obligated to pay out, and you can sue them if they refuse. If you don't comply with the policy terms -- or don't read or understand them -- then wouldn't you say it's your own fault? Some insurance companies are sleazy and try to avoid paying legitimate claims. What a surprise! You can find sleazy companies in any field. It's up to you to do your
research and be sure to choose an ethical and reputable one. They certainly exist. And surprise surprise -- they are rarely the cheapest. That's because the sleazy ones make their
money on that percentage of the population which is lazy and just goes with the cheapest option without doing any
research.
As others have said -- a bright line should be drawn between liability insurance, and hull/machinery insurance, which are two completely different
animals. I carry £5 million of liability insurance, about $7 million. If I hit a fisherman in a jon boat on a foggy day and cripple him for life, I will need every cent of that $7 million. I don't keep that kind of
money in a bank account waiting to pay it out for this kind of thing. No matter how careful you are, no matter how good you are, accidents happen. Do you want to roll the dice on being financially ruined by one of them every time you go out? Even if the odds are fairly good? Do you feel lucky?
And as others have said, if you cause damage to someone and don't have the cash to pay for it (up to possibly millions of dollars), it is simply immoral not to have liability insurance.
As to hull/machinery insurance, as others have said, if you can afford to lose the boat, then by all means, go for it. Just keep in mind that in many and probably most cases, the
accident which could cause the loss of your boat might not be your fault at all or even within your control. What if you are hit by an uninsured vessel?
I have never kept comprehensive insurance on my cars, not even expensive ones like a Porsche Turbo I once had, because I never drove a car I couldn't afford to replace out of ready cash (my principles of car
buying since I was a teenager were always -- always buy used, always pay cash, never drive a car you can't afford to replace). But also because, note well --
other drivers are obligated to have liability insurance. That means that I don't have much risk at all, with cars, of having to replace my car at my expensive because someone else ran into it an couldn't afford to pay.
It's different at sea -- many vessels are completely uninsured.
And that actually happened to me a couple of years ago -- a completely uninsured
commercial fisherman t-boned my anchored boat and caused about $35k worth of damage. I could have paid for it myself, but that would be very, very annoying, and it could have been much worse. What if he had sunk my boat? As it was, my insurer (Pantaeneus UK) paid for everything, didn't take away my "no claims bonus", and didn't even charge me the deductible. So that just paid for about 15 years of premiums right there.
So am I glad I bought insurance rather than doing what you are thinking about doing? You bet your ace I am.
Life is full of risks. Insurance is just a tool for managing certain of them. I have been an entrepreneur for the last 25 years, in a high risk business. I deal with risks every day. But there is hardly anything I hate more than an UNNECESSARY risk. And that's why I don't have any mortgages on anything I sail or live in or drive, and the boat and houses are very well insured with reputable (not the cheapest) insurers. To my mind, my boat insurance is possibly the best money I ever spent on my boat.