5.3 Personal Watercraft & Boat Coverage

What the Homeowners Policy Covers

The homeowners form gives only token watercraft protection. Memorize the two thresholds — physical damage and liability are governed by different rules.

Any boat above those liability thresholds, or worth more than $1,500, needs a dedicated marine policy.

Boatowners Policy (recreational powerboats, ~16-26 ft)

It is a package form with two sections, mirroring the homeowners structure:

Section I — Physical Damage: hull, motor, equipment, fuel tanks, sails, and trailer; written on a stated/agreed value basis; open perils subject to marine exclusions; towing and wreck-removal sublimits of roughly $500-$2,500; and fuel-spill liability under the federal Clean Water Act.

Section II — Liability: bodily injury and property damage to third parties (other boats, swimmers, docks); medical payments of roughly $1,000-$5,000; uninsured-boater coverage; and coverage that follows the boat onto land and during loading and unloading.

Personal Watercraft and Yacht Policies

The Personal Watercraft Policy (PWP) covers Jet Skis, Wave Runners, and Sea-Doos. It uses the same two-section structure as a Boatowners Policy but is priced higher because these craft have much greater accident frequency.

The Personal Yacht Policy covers vessels over roughly 26-27 feet or above a stated hull value and is true admiralty (ocean marine) insurance:

• Hull insurance — agreed value on the vessel itself
• Protection and Indemnity (P&I) — broad marine liability covering injury, property damage, and crew claims
• Navigational warranty — a defined cruising area; coverage suspends the moment the vessel sails outside it
• Lay-up warranty — a premium credit for a stated out-of-water period (commonly Oct 31-May 31)
• Crew coverage for paid hands, which can trigger the Jones Act and P&I obligations

A warranty in marine insurance is a promise that must be literally true; breaching it suspends coverage during the breach, unlike a mere representation.

Federal Maritime Statutes

• Jones Act — gives a seaman (a member of a vessel's crew) a negligence remedy against the vessel owner. It is excluded by personal forms; a paid crew needs separate crew/P&I coverage.
• Longshore and Harbor Workers' Compensation Act (LHWCA) — federal workers' compensation for maritime workers on navigable waters and on piers and docks. Personal forms exclude it; it requires a USL&H endorsement.
• Federal vs. state waters — admiralty law controls on navigable U.S. waters; state tort law controls on private, non-navigable lakes.

Common Watercraft Exclusions

• Wear, tear, gradual deterioration, latent defect, and inherent vice
• Marine life — barnacles, zebra mussels, and marine borers
• Mechanical or electrical breakdown
• Racing — though sailboat racing is usually covered as an exception
• War, nuclear hazard, and intentional acts
• Operation outside the navigational territory or in violation of the lay-up warranty
• Pollution liability beyond the fuel-spill sublimit
• Paid crew where the Jones Act or LHWCA applies

Choosing the Right Form — Decision Guide

Worked example: A 28-foot sailboat with a 35 HP inboard auxiliary engine fails the HO liability test on two counts — it exceeds the 26-foot sailboat threshold and the 50 HP inboard limit is irrelevant because the length already disqualifies it. Its hull also far exceeds the $1,500 Coverage C cap. The correct answer is a Boatowners or Personal Yacht Policy. Federal admiralty law applying to Lake Michigan never creates insurance — it only governs which body of law decides a lawsuit.

Hull Valuation: Agreed vs. Actual Cash Value

Marine hull coverage is written on one of two valuation bases, and the exam expects you to know which favors the insured:

• Agreed (stated) value — the insurer pays the scheduled amount at total loss with no depreciation; preferred for classic or high-value boats
• Actual cash value (ACV) — replacement cost minus depreciation; cheaper but pays less on an older vessel

A companion concept is wreck removal, which the Boatowners form sublimits and a yacht policy covers more broadly, often as a separate limit on top of the hull value because removing a sunken vessel can cost more than the boat is worth.

Medical Payments and Uninsured Boater

The liability section of a Boatowners or Personal Watercraft Policy mirrors auto structure: third-party bodily injury and property damage, medical payments (roughly $1,000-$5,000, paid regardless of fault to guests aboard), and uninsured boater coverage that responds when an at-fault operator of another vessel carries no insurance.

Choosing the Right Form — Quick Reference

The single most-missed point is that a warranty breach suspends coverage entirely for the duration of the breach; it is not a percentage penalty and is not waived by good intentions.