Types of Insurance

[IT_Mike]

Newly returning to the cruising life, and so much has changed in the past 35-40 years...

My question is this; I know we can purchase liability insurance, and then there's regular insurance, but can you get just catastrophic coverage?

Still thinking this out, but consider insurance which only accepts claims over 50% of the vessel value? Something like that. Self-insured for damages below that?

Ramblings of an old man

Mike

[rslifkin]

Originally Posted by IT_Mike

Newly returning to the cruising life, and so much has changed in the past 35-40 years...

My question is this; I know we can purchase liability insurance, and then there's regular insurance, but can you get just catastrophic coverage?

Still thinking this out, but consider insurance which only accepts claims over 50% of the vessel value? Something like that. Self-insured for damages below that?

Ramblings of an old man

Mike

That would basically just be insurance with a very high deductible. It's certainly worth talking to insurers to see what they think of a higher deductible and what it does to the policy premiums.

[Mike OReilly]

Mike, what you describe sounds like a comprehensive policy with a very high deductible. The other way would be to use an agreed-value on your policy which is 1/2 of the actual.

[GreenWave]

Originally Posted by Mike OReilly

Mike, what you describe sounds like a comprehensive policy with a very high deductible. The other way would be to use an agreed-value on your policy which is 1/2 of the actual.

THIS!!!! It will actually lower your premium and deductible.

[SailingHarmonie]

Be VERY careful about taking the advice to insure the boat for less than it's actual value. This has complications the people telling you to do this might not understand, or if they understand, they are not telling you.

If you insure the boat for 1/2 its actual value to "save money", every policy I have seen assumes that if you do this you are thereby self-insuring for 1/2 of EVERY loss. Is that what you want? They will also NOT total out the boat until the loss get to the ACTUAL value, NOT insured value.

If you have a boat with a real value of $200,000 and you insure it for $100,000, what happens if you suffer 180,000 in damage? It is NOT totaled, rather the insurance company give you a check for $90,000 (less deductible, and depreciation) and all the rest is on you.

If you have a lightning strike and it trashes all your electronics and your electrical system, if the total loss is $50,000, the insurance company starts by assuming you are self insured for $25,000 of that, and then they do their deductible and depreciation starting from there. You could end up being very disappointed in your final check.

It's not necessarily a bad idea, as long as you understand EVERY loss you ever claim will be discounted 50% right off the top.

[sailingharry]

Originally Posted by rslifkin

That would basically just be insurance with a very high deductible. It's certainly worth talking to insurers to see what they think of a higher deductible and what it does to the policy premiums.

Actually, I've long wanted this for ALL types of insurance. NOT a high deductible -- rather a "threshold." If I have a $10,000 loss, I'm not going to claim, not worth it (so I'd set a deductible at $10,000). This has the effect of requiring me to self insure to $20K, because a 12,000 loss is a $2,000 claim, not worth it

But with a $20K "threshold," I don't bother to file a claim for any loss under a $20K (which insulates the insurance company from 95% of all claims) but in the event of a $21K claim, they cover it all.

But I'm not an insurance tycoon and don't write policies. Such a shame......

[IT_Mike]

Originally Posted by sailingharry

Actually, I've long wanted this for ALL types of insurance. NOT a high deductible -- rather a "threshold." If I have a $10,000 loss, I'm not going to claim, not worth it (so I'd set a deductible at $10,000). This has the effect of requiring me to self insure to $20K, because a 12,000 loss is a $2,000 claim, not worth it

But with a $20K "threshold," I don't bother to file a claim for any loss under a $20K (which insulates the insurance company from 95% of all claims) but in the event of a $21K claim, they cover it all.

But I'm not an insurance tycoon and don't write policies. Such a shame......

That's what I was asking about. I've done it with health insurance (as much as they'll let me), and I automatically pay for home/auto issues to keep premiums down. I'd much rather keep a kitty on hand for nominal claims than throw it all at an insurance company.

[Mike OReilly]

Originally Posted by SailingHarmonie

If you have a lightning strike and it trashes all your electronics and your electrical system, if the total loss is $50,000, the insurance company starts by assuming you are self insured for $25,000 of that, and then they do their deductible and depreciation starting from there. You could end up being very disappointed in your final check.

OK, I'm not understanding this SH. Maybe you can explain since you seem to know about insurance.

My understanding is that many (most?) policies are "agreed value." This is what the policy premiums are based on. A total loss would result in the agreed value being payed out, minus depreciation and deductible. But a partial claim is still considered on its own merits, up to the limit of the agreed value.

So a lightning strike that takes out 10% of the "agreed value" will still be paid out at the full loss (minus the minuses). Not 1/2 of 10%.

[wholybee]

Originally Posted by rslifkin

That would basically just be insurance with a very high deductible. It's certainly worth talking to insurers to see what they think of a higher deductible and what it does to the policy premiums.

It is actually quite different. I want to be insured for the very unlikely event of a total loss. And I don't want to be financially ruined by it, so I want a low deductible.

For the things that happen that are more damage then my deductible, but not a total loss, I will pay for those.

[wholybee]

Originally Posted by Mike OReilly

OK, I'm not understanding this SH. Maybe you can explain since you seem to know about insurance.

My understanding is that many (most?) policies are "agreed value." This is what the policy premiums are based on. A total loss would result in the agreed value being payed out, minus depreciation and deductible. But a partial claim is still considered on its own merits, up to the limit of the agreed value.

So a lightning strike that takes out 10% of the "agreed value" will still be paid out at the full loss (minus the minuses). Not 1/2 of 10%.

I am confused on this as well. How does the insurance company determine that my insured value is not equal to actual value? Couldn't the insurance company arbitrarily say that my boat was worth 2x what I insured it for, so they are only paying half the claim, based on your description of how the policy works? Doesn't everyone provide a survey documenting the value they want to have covered?

[Mike OReilly]

Originally Posted by wholybee

I am confused on this as well. How does the insurance company determine that my insured value is not equal to actual value? Couldn't the insurance company arbitrarily say that my boat was worth 2x what I insured it for, so they are only paying half the claim, based on your description of how the policy works? Doesn't everyone provide a survey documenting the value they want to have covered?

Yes, indeed. As I understand it, this is one of the purposes of the survey. But I know that these values can and are adjusted downward to reduce premiums and lower risk to the underwriter. This is what happened in my recent insurance policy case.

As I understand it, the policy covers up to the agreed value amount. Whether this is 1/2 the value of the boat is irrelevant. A partial claim will still be considered, up to the limit of the agreed value.

[letsgetsailing3]

Originally Posted by rslifkin

That would basically just be insurance with a very high deductible. It's certainly worth talking to insurers to see what they think of a higher deductible and what it does to the policy premiums.

I've tried pricing this out (and actually doing it sometimes) before, but it doesn't seem to save as much in premium $$$ as one would think. I don't really understand why.

I think in the long term it does work out, just because you end up making fewer claims. In other words, if you never use your insurance, it does seem that your premiums don't go up as much. Didn't work for Florida home insurance, though. That shot through the roof (literally) even though I never made a claim.

[wholybee]

Originally Posted by Mike OReilly

Yes, indeed. As I understand it, this is one of the purposes of the survey. But I know that these values can and are adjusted downward to reduce premiums and lower risk to the underwriter. This is what happened in my recent insurance policy case.

As I understand it, the policy covers up to the agreed value amount. Whether this is 1/2 the value of the boat is irrelevant. A partial claim will still be considered, up to the limit of the agreed value.

So say your boat is worth 200k if sold via private sale. The survey is 100k, and that is what it is insured for. I do not expect the insurance to discount a 50k claim to 25k because i have assumed 50% liability by insuring the boat for less than its value. The insurance company has no basis for this adjustment, because the only evidence of value is the survey.

Now, if someone gives the insurance a survey that says 200k, and they negotiate coverage of 100k, then i get it, read what you negotiated before you sign it.

[letsgetsailing3]

Originally Posted by Mike OReilly

Yes, indeed. As I understand it, this is one of the purposes of the survey. But I know that these values can and are adjusted downward to reduce premiums and lower risk to the underwriter. This is what happened in my recent insurance policy case.

As I understand it, the policy covers up to the agreed value amount. Whether this is 1/2 the value of the boat is irrelevant. A partial claim will still be considered, up to the limit of the agreed value.

A potential problem with undervaluing a boat for insurance purposes is in the case of a total loss. If your boat is under insured, the insurance company may choose to total loss it when damages get to half of the claimed value, and write you a check. (Also, technically, if they total loss it the boat becomes theirs, though they generally don't want boats.)

Edit: See what wholybee wrote. There are important nuances in an "agreed value" policy which affect premium and coverages. The devil is truly in the details, and insurance companies understand nuance.

[Mike OReilly]

Originally Posted by letsgetsailing3

A potential problem with undervaluing a boat for insurance purposes is in the case of a total loss. If your boat is under insured, the insurance company may choose to total loss it when damages get to half of the claimed value, and write you a check. (Also, technically, if they total loss it the boat becomes theirs, though they generally don't want boats.)

Edit: See what wholybee wrote. There are important nuances in an "agreed value" policy which affect premium and coverages. The devil is truly in the details, and insurance companies understand nuance.

Yes, I understand the nuance. But it seems an easy one to avoid. Just agree to a value that is lower. Insurance company doesn't care. They're basing their offer based on the risk assessment, which includes their total exposure.

This total loss issue could be important though. Best to makes sure your contract does not include this kind of clause if you're going to undervalue your boat.

Seems to me, the simpler approach is the first one I mentioned: simply buy a policy with a very high deductible.