Boat Insurance Glossary

  • Salvage Coverage: Salvage coverage is a type of insurance in a boat insurance policy that protects the boat against additional loss. For example, a boat that is grounded may need additional protection to keep it from being further damaged or a sunken boat may require extra funds to lift it out of the water. Not all boat insurance policies include salvage coverage, so these costs are in addition to any insurance claim for the value of the damaged or sunken boat.

  • Hurricane Deductibles: Some insurance policies require a separate deductible for hurricane-related damage to a boat, which is usually higher than deductibles for other covered causes of loss. Therefore, boat owners often bear more of the cost of hurricane damage than they would from another cause. A higher hurricane deductible, however, could decrease the additional premium charged for hurricane damage.
  • Exclusions: Exclusions are provisions of an insurance policy that refer to specific risks, hazards, perils, or occurrences not covered by the policy. Typically part of the insurance policy, exclusions spell out the details of what is not covered. Sometimes exclusions are extremely broad (like "war") and apply to many different types of policies, but other times they are tailored to a certain type of policy. Since most boat insurance policies are written on an "all-perils" basis, which means that every peril is covered except any specifically excluded, it is important that boat owners fully understand the list of exclusions on their insurance policy.

  • Liability: A liability is any legally enforceable obligation. For insurance purposes, a liability is the obligation that individuals or other entities have to pay the costs of an injury or damage caused by their actions. Insurance is essentially the only way boat owners can protect themselves against various kinds of liabilities.

  • Rider: A rider is a special form that is attached to an insurance policy that alters or expands the policy. Riders commonly provide additional insurance coverage that is not included in the original policy, such as a boat insurance rider on a homeowner's insurance policy. A rider will, in most cases, require an extra premium to be paid by the policy owner in exchange for the additional insurance coverage.

  • Endorsement: An endorsement to an insurance policy changes the insurance provided by the policy, with common changes including added coverage for certain risks or higher limits of insurance payouts. Insurance policy endorsements can also be used to limit or restrict the insurance coverage, to clarify the way the coverage is applied, or to add other parties or locations to the insurance policy. In sum, when policy holders need to change their basic policy coverage, they do so through an endorsement. Depending on the details, the endorsement may either require an additional premium or decrease such costs.

  • Deductible: The insurance policy deductible is the portion of any loss that is covered by the insured before the insurance policy begins to pay. Generally, the lower the deductible is, then the higher the cost of the insurance policy. A policy that offers no deductible is called a "first dollar" insurance policy because it pays on the first dollar of the loss. Deductibles can be calculated per occurrence, which means the insured pays the deductible for every loss no matter how many occur, or be calculated based on the policy period, which means there is a maximum amount the insured usually pays over the course of the policy.

  • Actual Cash Value (ACV): The ACV of an item is the amount of money that the item would get if sold on the open market. For many items, the ACV turns out to be less than the cost of replacing the item because of depreciation. Some insurance policies only pay the ACV of possessions that are lost or damaged by a covered cause of loss. This type of coverage have lower premiums than that of replacement cost value (RCV), which means the owner has a greater risk of not getting reimbursed enough from the insurance policy to cover the replacement costs of damaged or lost possessions.

  • Replacement Cash Value (RCV): The RCF of an item is the amount of money it would take to replace the item with a new one, no matter how old the damaged item was beforehand. Some insurance policies pay the RCV of items that are lost or damaged by a covered peril, which may enable the insured to afford new things in the event of a loss. However, most property insurance policies charge a higher premium for this option compared to the ACV policy.

  • Risk: A risk can either be the uncertainty that arises from the possible occurrence of certain events (i.e., the chance that a boat owner will be sued or that a boat will have an accident) or it can refer to the actual insured person, business, or property covered by a particular insurance policy.

  • Limits: The limits of an insurance policy are the total amount of losses that will be covered by the policy. Sometimes there is a limit for the whole policy as well as individual limits for specific types of coverage within it. Other policies may have annual limits, which impact the amount paid in a specific year on losses, in a multiple-year policy.

  • Depreciation: Depreciation refers to how much property can decrease in value over time, typically due to age, wear-and-tear, and obsolescence, such as when computers lose their value because of newer technology as opposed to wear. For insurance purposes, depreciation from wear-and-tear is usually subtracted from an item's replacement cost to determine its actual cash value. In some cases, depreciation due to other causes can be deducted as well. If property is insured by an ACV policy, then such loss of value often means that insurance payments will not fully cover replacing the item with a brand-new one.
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