Insurance, what can you afford to lose?

[WanderingStar39]

Interesting discussion. I carry full insurance on the boat, liability only on the car. I'm thinking of liability only for the boat. If she were lost, replacing her would wipe out my savings. I would probably have to settle for much less boat instead. But the odds against losing her are rather high. As for damage, she suffered some in Sandy, insurance paid for the repairs. But it would not have broken the bank to pay myself, especially because I would have done most of the work.

[gonesail]

it stinks really. comprehensive insurance is just a bet that you will lose your boat. and actually you are hoping you will not lose it. and the insurance company will be hoping they win their bet as well which means they take your money. in my mind you should not own a boat if you can't afford to lose it.

[Gene Neill]

Americans have a peculiar mindset that "you can't afford not to have insurance". Insurance is widely regarded as a necessity of life, right along with food, clothing and shelter.

I do not share this point of view.

Insurance, by its very nature, is obviously a statistical loser. Insurance companies are not there to help you. They exist for no other reason than to make the greatest possible profit. They are not "like a good neighbor", and they are not "good hands people". They are in the business of taking your money. Period.

Insurance companies are essentially casinos, where the gambler (you) places a bet against himself. And, as any gambler knows, the house always wins. They have many centuries of experience at this game, they control the odds, and you better believe they are playing to win.

To insure or not is a purely personal choice, based on one's individual circumstances. For many people, peace of mind is worth the policy premium all by itself.

As for me, I would not own a vessel I could not afford to lose. Instead of, say, a million dollar boat, I would opt for a $300K boat, and $700K in the bank. But that's just me.

[mglonnro]

I think the "afford to lose" rhetoric is a bit strange.

There is the risk of something happening and a fee you can pay the insurance company to lessen the loss in case that risk materializes.

If the deal is good or not depends on the risk, the fee and the insurance company's obligations should something happen.

[gmakhs]

This summer I was working on a boat that have been damaged twice .
2 years ago , had a broken rudder total cost of repairs was 4000 euro
And last year the boat had a hole on its stern and a broken rudder due to broken mooring line in the port and bad weather , the cost of this repair was 15.000 euro in total .
The boat is a Bavaria 38 build in 2002 .
The insurance paid both times and took a loss on this bet since the owner was with them only 3 years .
The boat was grounded for a third time after my delivery to her owner on the verry first day .(before I even fly home , I received a call in the hotel )

As I know the insurance refused to renew the contract but the owner took back his 1500 euros payments worth

[jdaltonpe]

It is worth it depending on your situation. Example - I was working on the Island of St Maarten and living on my trimaran when Irma hit. As it approached I was faced with a decision to focus on saving my project or sailing away to save my boat. The boat was fully insured and the project was about to open but had no business interruption insurance and there was disagreement with my partners as to the level of preparedness required. The financial ramifications to me were clear and although I loved the boat I did my best to protect it and took my chances. It worked out in the end, preparations worked well at the project and we were one of the first tourism operations to open after the storm. I now live on a newer, better boat. I am no longer tied to the work and free to sail where I please. Since I claimed an undisputed total loss on the last boat insurance has almost doubled for the new boat and is very restrictive regarding cruising grounds. I think I will stay with just 3rd party liability for my extended cruising.

[Mike OReilly]

Originally Posted by daletournier ...Insurance works on fear, the odds are in their favour or they wouldn't do it, is our, the consumers fear rational?

Absolutely works on fear. And no, in the vast majority of situations looking at cruising-style boats, the fear is irrational.

I’ve participated in this discussion many times here on CF. I’ve always advocated for a rational risk assessment approach to insurance. But it seems that many people fail to appreciate what risk actually is. Risk is proportional to the likelihood of an event happening AND the impact of said event.

Risk ∝ Likelihood of event X Impact of event

R ∝ L x I

As either I or L go to zero, the Risk goes to zero. But in the case of cruising boats, most people focus on the I side, and ignore the L side. This is where the "insure if you can't afford to lose the boat” idea comes from. This is absolutely driven by fear which is stoked by advertising, by the media, and by our culture in general.

The fact is that the Likelihood of a cruising level boat suffering any significant damage is exceedingly low. This is borne out by publicly available data which anyone can look at (and which I’ve posted on CF many times). Therefore Risk is generally low for most of us.

We all have different levels of risk tolerance. And some of us are engaged in riskier cruising styles. This is why we all must make our own assessment. But it’s hard to make these decisions completely rationally, especially when all the messaging around us is focused on stoking our fears.

[jimglasair3]

Originally Posted by Chotu

You know, every time I run the numbers on any insurance I get to this issue. Even health insurance comes out like this.

I look at a $600 per month health insurance plan that doesn't cover plenty of routine things and has a high deductible. Payments alone are $7200 per year at $600 per month.

My actual out of pocket medical costs are about $3000 a year on a bad year. ..

I felt the same way for years about health insurance. Never had a claim other than preventive. Was about to drop my 21 year old daughter and let her get on some cut-rate plan for college kids, but kept it anyway for piece of mind. It's a Dad thing. Thank goodness! Two months ago she had a bad heart valve, and $240,000 worth of surgery and hospital time later, I am quite grateful it was a $4,000 cap.... insurance is just plain expensive, right up until you are the unfortunate 1% that really needs it...

[ArmyDaveNY]

Originally Posted by gmakhs

Thinking that the boat might be new and you have 10 good years of the riggings, engine etc that would make 30.000 , saving that money is enouph to repair the boat in most common damage .
Ofcourse you will need to keep a third liability to cover other issues .
Thinking that and that losing the value of the boat is not gonna effect your life critically to me.it seems that the insurance is just waste of money .

Your calculations are correct however I would also include the cost of kit and personal items inside the boat. Many of these can be ruined if the vessel ships a lot of water. The cost of a total loss must also be balanced against the likelihood of loss and of course, the likelihood of the insurance paying out.

[daletournier]

Originally Posted by Mike OReilly

Absolutely works on fear. And no, in the vast majority of situations looking at cruising-style boats, the fear is irrational.

I’ve participated in this discussion many times here on CF. I’ve always advocated for a rational risk assessment approach to insurance. But it seems that many people fail to appreciate what risk actually is. Risk is proportional to the likelihood of an event happening AND the impact of said event.

Risk ∝ Likelihood of event X Impact of event

R ∝ L x I

As either I or L go to zero, the Risk goes to zero. But in the case of cruising boats, most people focus on the I side, and ignore the L side. This is where the "insure if you can't afford to lose the boat” idea comes from. This is absolutely driven by fear which is stoked by advertising, by the media, and by our culture in general.

The fact is that the Likelihood of a cruising level boat suffering any significant damage is exceedingly low. This is borne out by publicly available data which anyone can look at (and which I’ve posted on CF many times). Therefore Risk is generally low for most of us.

We all have different levels of risk tolerance. And some of us are engaged in riskier cruising styles. This is why we all must make our own assessment. But it’s hard to make these decisions completely rationally, especially when all the messaging around us is focused on stoking our fears.

Good post Mike. Ive been thinking about RxI today and you are right, we tend to focus more on the I.

I've cruised for quite sometime and based on what ive experienced the "R" is quite low, as you suggest BUT fear of the "I"is strongly built in.

[SVPP]

I intentionally bought a boat I could afford to lose. I keep 3rd Party insurance on it. This mainly enables me to use a marina whenever I want.

Upgrades, are always from items I buy second hand- except the standing rigging and steering cables.

My boat is 37foot an very strong. If she sank tomorrow, I would be more worried about any environmental damage than the fact that I had to find another.

[Dooglas]

Originally Posted by Chotu

I look at a $600 per month health insurance plan that doesn't cover plenty of routine things and has a high deductible. Payments alone are $7200 per year at $600 per month. My actual out of pocket medical costs are about $3000 a year on a bad year.

An interesting example. This one is really more like marine liability insurance. The potential financial risk/impact can be very high. That is the benefit of insurance pools. My son was hit several years ago by a driver who ran a stop sign. The at fault driver had the minimum requirement of $25,000 in liability insurance. My son's car was a total loss, his medical bills were about $125,000, and he was unable to work for 3 months. Darned good thing he had auto and health insurance in that instance. Beyond the liability settlement with the other insurance company, the at fault driver is making a small monthly payment against the large medical obligation. That will never be fully paid as the person has little in assets and only a modest income. In other words, it isn't just a question of whether you can afford to lose your boat, it is a question of whether you can accept the financial consequences associated with such an event. Be sure you have protection against events that can seriously damage you financially.

[Elie]

Many cruisers seems to be able to live with a liability coverage in US waters. Where to get liability only coverage only?. Curious to see who provide such coverage. Many thanks.

[Sailmonkey]

Originally Posted by Elie

Many cruisers seems to be able to live with a liability coverage in US waters. Where to get liability only coverage only?. Curious to see who provide such coverage. Many thanks.

For US waters were using progressive. However I’m still hunting for a global liability policy that can be issued to a 42 year old boat.

If we cannot find anything we’ll go naked. Much to the chagrin of the crowd who insists you’re a lowlife scum without.

[Simi 60]

In Australia you likely won't get in a marina or pulled out of the water without it.
Vessels over 49ft also have to carry wreck removal / cleanup insurance.
Pretty sure that makes full cover the only option.