Physical Damage Coverage

Watercraft Liability Coverage

Medical Payments Coverage

Emergency Services Coverage

Coverage for Personal Effects

There are also additional coverage options that you can learn about by either asking your current auto insurance agent, yacht insurance broker or by learning about it online.

Boat Insurance Tips
Though there are currently no federal or state laws requiring boat insurance in the United States, most boat owners would agree that insurance is a fact of boating life. Boats being used as collateral on loans usually have insurance which names the bank as the loss payee in the case of damage or destruction.

Boat insurance policies can vary widely from one company to the next, unlike home or auto insurance.

Ask People You Know
One way to find a great boat insurer is to ask relatives and friends who have had a boat insurance claim in the 6 months to 1 year. Boat insurance companies may be good at taking monthly premiums, but how a company reacts when something goes wrong is a better much better indicator of how they will be as a new or used baot insurer.

You can also look up boat insurance carriers at www.ambest.com/ratings. These ratings are the boat insurance industry's benchmark for assessing a boat insurer's financial strength. We suggest looking for a boat company that has an "A" (excellent) rating. State insurance regulatory agencies are also a good reference and can be always found online.

Your Homeowner's Policy
You should consider purchasing a separate insurance policy for your new or used boat, rather than adding it to your homeowner's policy. Adding a boat to your insurance policy has certain marine-related risks such as salvage work, wreck removal, pollution or environmental damage. Whatever dollar amount the boat is insured for, it should have a separate but equal amount of funds available for any salvage work. This means that you're compensated for the loss of your boat and not having to pay additional, out-of-pocket costs to have a wreck removed from a waterway.

"Actual cash value" policies, on the other hand, cost less up front but factor in depreciation and only pay up to the actual cash value at the time the boat is declared a total or partial loss or property was lost.

Remember, Your Needs First!
A good insurer will tailor your coverage to fit your needs so there will be no surprises. For example, bass boaters may need fishing gear and tournament coverage as well as "cruising extensions" if they trailer their boat far from home. You may want "freeze coverage" if you live in a temperate state because ironically, that's where most of this kind of damage occurs. "Hurricane haul-out" coverage helps foot the bill to move your boat to dry ground.

(Thank you Boat U.S., the nation's largest recreational boat owners association, for this information)

Ask your yacht broker what lender is offering the best rates and terms and specifically what those rates and terms are. Loans are now amortized over 15-20 years, require 20% minimum down payment and, fixed rates are around 6.2- 7.5%. Lenders do not recognize charter income as additional income to qualify for a loan so forget about that. Some loan brokers don't want to hear that you will be using the boat to make money (because lenders feel that they depreciate in value faster than normal If you are buying a charter yacht then your financing resources are limited. Talk to your yacht broker about tips to find more charter yacht lenders.

Tip: If you have sufficient equity in some real estate then the cheapest loan is usually a real estate equity loan.

Tip: Get pre-approved by a lender. It is free to get pre-approved and marine loans have no points to qualify. They are all "simple interest" loans with no pre-payment penalty. If you know you will only keep the boat 2-3 years then the "out of pocket" expense is surprisingly low. Many yacht buyers have a three year " itch cycle". That is, they keep a boat for three years, then they "get the itch" to sell it and try out another boat for three years. If your "Beacon" (or "FICO") credit score is less than 700 then the situation may be difficult to get approved. Lenders like this score to be in the mid 700's or higher. Lenders also look at the debt to income ratio. They want this to be below 35%. Be careful when filling out loan applications. You may want to omit that unrecorded debt you have with Aunt Sally. Use only marine lenders, as most banks do not understand the yacht lending business and don't lend for yachts valued over $100K. If you know your income as shown on your tax returns will be not be at least 200% of your debts then ask for a "no-income verification" or a "no documents" loan. Essex Credit does these.

Tip: When you are filling out your application, if you have ANY questions, let your boat broker or loan broker help you fill in the blanks. There are some seemingly innocuous pitfalls that you do not want to not fall victim to your experienced boat broker will know about these pitfalls. The loan broker is not always on your side. It is his job to weed-out potential poor credit risks for the lenders, so be alert to this when speaking to them. VERY IMPORTANT: Get a copy of your credit report BEFORE you fill-out the application or talk in-depth to any loan brokers. YOU NEED TO KNOW IF YOUR CREDIT SCORES ARE OVER 700, WHICH IS USUALLY THE CRITICAL CREDITWORTHINESS LEVEL. Go to www.transunion.com or www.IdentityGuard.com and order the report that gives your credit scores from all three credit agencies. Lenders usually take the average of the three FICO scores. There can be mistakes and debts listed that should not be there. These mistakes take time to correct. If your average score is below 700 then you may have some credit file cleaning to do. Usually this means disputing outdated information which often lingers in your credit file.

Tip: Many banks say they are "interested in yacht lending" but they are really only interested in finding that "one in a hundred golden borrower" whose savings accounts they can also get so you waste your time filling out forms only to be rejected if you don't have 110% perfect credit or don't have the savings accounts they want to get their hands on. If your credit is less-than-perfect, talk to your yacht broker or salesperson about where to apply. He is there to help you get financed! You really only want to deal with serious marine lenders. See the list of marine loan specialists (brokers) at the bottom of this page.

Tip: If you are traveling, and the closing is in Florida, sign your loan documents out of the state of Florida to avoid paying "State Document Stamp Fees" If you sign your loan paperwork in Florida you will pay a state fee of $3.50 per $1000 of the loan amount. This can add up if your loan amount is greater than $250,000.

Tip: Loan interest payments are deductible as "second home mortgage interest expenses" unless you already take this deduction on a second home. The IRS says that "a boat qualifies as a second home if it has cooking facilities and a toilet". This can include a Porta-Potti and a Sterno stove. So, take that deduction!

Tip: Concerning " seller financing": It may be possible in a very few, very rare cases like with some " 501- c(3)" charities. But you will need 40% down and are severely limited to only the boats they have taken in as donations (it will probably NOT be your dreamboat). Ask your broker what is available here. Because yachts can be easily moved out of the country, 99.99% of all sellers will not agree to seller financing. Boats are just not treated the same as real estate.75% of all seller-financing deals are in default within 12 months which is why sellers don't like this.

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