Insurance, what can you afford to lose?

[daletournier]

As discussed in another thread my insurance premium went up 28% this year, although I made no claims.

Since then I have found a France based company that has quoted me a reasonable premium of approx 1.5% of boat value.

More and more cruisers are choosing Liability insurance only. Something I've heard regularly is "insure if you can't afford to lose the boat", what does this mean? Can any of us "afford to lose our boats?

To put it into perspective using myself as an example, if my boat was uninsured and I lost it completely I can still function tommorow, it hasn't affected my income, there's no mortgage on it, I have no debt BUT to say I can afford to lose it would be a stretch, in my case 200k is real money.

How do others interpret the above statement? No right or wrong, just interested in the discussion.

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

[gmakhs]

So you are paying 3000 per year with the French insurance .
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 .

I did have the same thought on my boat and I decided to go only with third liability .

The reason I quite my insurance :
Continues request for surveys when cruising in places with no good surveyors therefore was a waste of.money just for signature .

Personnel or agents unable to understand what I really needed to be insured 80% of them where quoting me for propeller shaft , engine and trailer on a sailboat .

Limiting my cruising ground

They don't pay in front so I have to do all the job repairing the boat and finding the technicians , pay them and.then waiting for the insurance to.pay back (so if the boat gets more.damage than I can afford anyway insurance won't help much )

The premium price went to high to worth it (800 euros per year for my boat is just too high )

Now to your question , money wise I can afford.losing the boat , this means I will have to go back home and start from scratch with another boat or quit sailing for a.few years but it won't effect my life seems I have no mortgage or load on it .
Emotionally it's very hard losing something you call home.and.work.on it every day for few years .

[daletournier]

Originally Posted by gmakhs

So you are paying 3000 per year with the French insurance .
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 .

I did have the same thought on my boat and I decided to go only with third liability , for.me the main reason was thatbtgey werent covering my cruising grounds as well .

"Critically" is a good way of looking at it. Life goes on, a big ouch, but it goes on.

Insurance is definitely programmed into us, I look at my folks, full insurance for everything for 50+ years, never made a claim.

Full comp really is only there to cover me in the case of a complete loss.

[thinwater]

The "afford to lose" test is fairly obvious. Insurance companies make a profit while providing risk pooling. Insurance is a good value if:

1. Your risk is higher than the insurance companies perceive. (Example, you are a bad driver, drive a lot, or drive in high risk areas. Also towing insurance along the ICW.)
2. You cannot pay the highest loss. This is why we need liability insurance; there is practically no cap.
3. The loss would be somewhere between catastrophic and very painful to your lifestyle. For example, most of us need home insurance, but honestly, most of us would be better off without full coverage on our cars (we can afford a new one), unless rule (1) applies. Few people would worry about insuring a kayak.
4. You are nervous. Worthwhile if it keeps you awake at night.

On the other hand, if you are not accident prone, avoid high risk sailing, the boat is a small part of your net worth, and you are a confident person, then you save money by going bare. Over a lifetime, your premiums will be more than your losses. If the company insures boats for 1.5%, they are betting that less than 1 in 50 will experience significant loss in any year. Some places that sounds like a very safe bet, others not so much.


I could go bare on my F-24 (maybe I will in the future), but I would not have on my cruising cat (loss would have dented my retirement too much).

[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.

The numbers are much the same for a boat.

Don't get me started on car insurance which is mandatory in almost every state. I'm looking at an entire lifetime accident free. Insurance was recently quoted to me at a rate of $400/mo or something. I would have paid $144,000 in insurance payments over my accident free driving lifetime. That's several completely new cars I could have destroyed and bought for other drivers for the same money. I've never had auto insurance except many years ago when I had a loan for a car and the bank required it. (It's not mandatory in my state with a good driving record)

It's the same with my boat. Yes I got clobbered by a hurricane and sustained a real loss. However, I'm fixing it and it's less in total than my insurance would have been.

[laika]

I pay 3 percent of hull value per year for liability only. A small cruising boat in the Western Caribe, I was lucky even to get that. Zero claims over 8 years of ownership. Boat is worth $25k but have put in well over that in to refit value over the years. The quote for hull coverage was $4k/yr. That's a "new" boat every 6 years.

Apparent my risk pool is fairly hardcore bordering on death wish

[mglonnro]

The most important peace of mind I want is protection against total loss.

"Afford to lose" because the sum of monetary value and use value isn't perceived as very high. I could maybe imagine myself saying that about a lower-end iPhone. I think a very small percentage of people feel that about a 200k sailboat

[belizesailor]

Originally Posted by daletournier

"Critically" is a good way of looking at it. Life goes on, a big ouch, but it goes on.

Insurance is definitely programmed into us, I look at my folks, full insurance for everything for 50+ years, never made a claim.

Full comp really is only there to cover me in the case of a complete loss.

Yes, I think critical/functional financial impact is a good way to look at it.

In many cases I think, boat loss would be a short-term financial bonus...eliminating all the expense associated with boat ownership (assuming the loss did not also create a big liability...like environmental clean up).

In my case, I own a relatively inexpensive boat which is also 18 years old now. I paid cash for it and it is a very small percentage (single digit) of my net worth. So, a total loss would not have a critical financial impact...it would actually be a big cash flow bonus! [emoji322]

What would suck would be major damage. Then I would have to decide between spending the $s to repair it or selling at salvage rates. I would likely choose the later.

By contrast, I know folks whose boat is a significant % of their net worth. Some paid cash, some have mortgages. Some who paid cash are now struggling to afford insurance...going uninsured is a big risk for them.

Worst case would be total loss of a mortgaged boat and the insurance co not paying up. Now youve lost the asset and retained the liabilty. [emoji21]

[Metal Boat]

Thats where the Insurance company has you by the balls. Imagine your yacht sinking and not only having a total loss of say $200,000 on a real boat but also the yacht sinking somewhere it had to be recovered as well? My car is only worth 6500, but the insurance company wants almost $850 per year plus a 500 excess and I havent crashed a car in a 35 year driving career. They can stick it, I choose to pay $120 per year to cover me driving my car into old mates Mercedes. If I crash the car too bad, I can afford to replace it. But if my even $100,000 boat sank it would cause hardship I could not recover from. Health Insurance is a total rort, I wont pay it. In Australia the public health system will save you if you are dying, and I have a medical problem that has almost killed me 8 times and admission was totally free. But the moment I pay private I get milked for all the associated costs as well as my monthly bill. I guess you have to ask yourself can you afford to replace it as a percentage of your net worth?

[Chotu]

I also think this comes down to the type of boat. I do not wish to start a mono/multi debate but if I had a monohull still (well, I do have one if each currently), I'd insure the mono for total loss since it can sink and be completely unrecoverable.

My foam core, ultra lightweight multi can have holes cut into every compartment below the waterline and still be towed to shore to be fixed up. So I'm less likely to insure that one.

Same probably goes for a rugged steel mono.

Theft doesn't seem to be a huge problem so we are looking at damage and/or total loss situations only for the most part.

One wildcard would be the lightning strike.

[gmakhs]

Originally Posted by Chotu

I also think this comes down to the type of boat. I do not wish to start a mono/multi debate but if I had a monohull still (well, I do have one if each currently), I'd insure the mono for total loss since it can sink and be completely unrecoverable.

My foam core, ultra lightweight multi can have holes cut into every compartment below the waterline and still be towed to shore to be fixed up. So I'm less likely to insure that one.

Same probably goes for a rugged steel mono.

Theft doesn't seem to be a huge problem so we are looking at damage and/or total loss situations only for the most part.

One wildcard would be the lightning strike.

There are unsinkable monos in the market and you can convert your mono to unsinkable , for some older monos the cabin liner already works by reducing or stoping the flow if you have a hole on the bow under the water line .
Making your lockers water tight is another way to make your mono collision "safe"
Looking at my boat the only point that can have massive water coming in is the stern cabin .
Lighting strike again has to do with your electronics and how you can live without them , so considering a boat needs a GPS and an autopilot only to get you safe and comfortable at port I don't think is an issue , you can replace them or repair them over time or learn to live without them (your batteries will be happy .)

[Chotu]

Originally Posted by gmakhs

There are unsinkable monos in the market and you can convert your mono to unsinkable , for some older monos the cabin liner already works by reducing or stoping the flow if you have a hole on the bow under the water line .
Making your lockers water tight is another way to make your mono collision "safe"
Looking at my boat the only point that can have massive water coming in is the stern cabin .
Lighting strike again has to do with your electronics and how you can live without them , so considering a boat needs a GPS and an autopilot only to get you safe and comfortable at port I don't think is an issue , you can replace them or repair them over time or learn to live without them (your batteries will be happy .)

Very much agreed.

I was just speaking in general but you're absolutely right.

Plenty of heavy, overloaded or poorly designed multis will sink too.

The individual boat matters.

And I thought I was the only one who didn't like electronics so I didn't mention having very little. Ha ha ha

[gmakhs]

Hehe , they are nice gadgets , but not critical equipment .
For now I have 3 plotters and 4 autopilots 2 of them (autohelm) should not be effect from a lighting .
Other gadget's like wind instruments are nice , and can be connected with the ev100 to make the autopilot work as a windvane but for the price of the instruments I can just buy a windvane (or manufacture one if you transorm hugging rudder .)

P S there are people who have even electronic gauges for the diesel tanks .... For me the engine hour clock and a dipstick have done the job well for the last 8.000 miles .

[daletournier]

Originally Posted by belizesailor

Yes, I think critical/functional financial impact is a good way to look at it.

In many cases I think, boat loss would be a short-term financial bonus...eliminating all the expense associated with boat ownership (assuming the loss did not also create a big liability...like environmental clean up).

In my case, I own a relatively inexpensive boat which is also 18 years old now. I paid cash for it and it is a very small percentage (single digit) of my net worth. So, a total loss would not have a critical financial impact...it would actually be a big cash flow bonus! [emoji322]

What would suck would be major damage. Then I would have to decide between spending the $s to repair it or selling at salvage rates. I would likely choose the later.

By contrast, I know folks whose boat is a significant % of their net worth. Some paid cash, some have mortgages. Some who paid cash are now struggling to afford insurance...going uninsured is a big risk for them.

Worst case would be total loss of a mortgaged boat and the insurance co not paying up. Now youve lost the asset and retained the liabilty. [emoji21]

This is an interesting way of looking at things, cruising costs me money! Not just in the form of spending on the boat but "opportunity cost".

I enjoy cruising, I wouldn't do it other wise BUT there's a couple of other things I would be doing (and enjoy doing) if not cruising that would generate me a decent return.

Definitely don't want to sink but it would force a direction change that would also work out.

[valhalla360]

Originally Posted by daletournier

More and more cruisers are choosing Liability insurance only. Something I've heard regularly is "insure if you can't afford to lose the boat", what does this mean? Can any of us "afford to lose our boats?

To put it into perspective using myself as an example, if my boat was uninsured and I lost it completely I can still function tommorow, it hasn't affected my income, there's no mortgage on it, I have no debt BUT to say I can afford to lose it would be a stretch, in my case 200k is real money.

How do others interpret the above statement? No right or wrong, just interested in the discussion.

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

The reason it's stated that way is because there are lots of things that play into the choice but ultimately it's a personal choice:
- If you are worth $100million, self insuring a $200k boat may make a lot sense. It would have no measurable impact on your life if you lost $200k.
- On the other hand if your net worth is $400k counting the value of the boat and it's your primary home....losing it is a massive impact on your life.

Ultimately, you need to decide but it's a good test.