How much should I insure my boat for?

[V1701]

Hi all,
Hope this isn't a daft question but I am wondering how much to insure my boat for. I am inclined to insure it for more than I paid for it, not a ridiculous amount more but lets say I paid £25k and insure it for £30k. In the event of a total loss would the insurance company payout the insured sum (minus excess) or could they ask to see a receipt and pay out that amount, in which case no point insuring for higher value? Or would they look at the market (in the absence of a Glass's guide for boat prices) and decide on a value based on that? It's my first boat and I haven't owned a car or motorbike for years either so very unused to dealing with insurance matters...

Any advice gratefully received, thanks,
David.

 

[lw395]

Fair Value

You should insure it for its fair value.
That may be more or less than what you paid for it.
You should estimate the true cost of replacing it with the same boat in the same condition.
Look at what others are advertised for. If it's not a common design then consider the prices of similar boats that you might have bought at the time.

If your valuation is way above the purchase price, you should make sure you can justify it, perhaps you have improved the boat, or bought it from a rushed seller at end of season etc.
Make sure you have photos that show it's in top condition.

Also keep receipts for everything, because if it has grown in value you might be looking at capital gains tax down the line, particularly if inflation picks up.

 

[Ubergeekian]

Also keep receipts for everything, because if it has grown in value you might be looking at capital gains tax down the line, particularly if inflation picks up.

However, there may be no tax to pay if both of the following apply to the possession:

* it had an expected useful life of less than 50 years when you got it
* it hasn’t been used in your trade or job

An example of this might be a caravan or motor-boat you bought and used for pleasure.

From http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

 

[capsco]

From http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

From personal experience I can confirm that is the case.

 

[lw395]

From http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm

Fair enough, but they've been known to change the rules before. I expect the idea of our boats having finite lives would be a touchy subject for some people too? Plenty of fifty year old boats out there as it is.
And some people do use their yachts in business or trade, e.g, a spot of tuition or chartering.

Still good advice to keep all significant receipts. If your boat is lost or stolen, it shows you have kept spending on the boat.

We're off the point though. If in doubt you should discuss the value with the broker, it's probably better to do this when taking out the policy than when claiming.

 

[lw395]

And note it says 'there MAY be no tax to pay' not WILL or SHALL....

 

[V1701]

You should insure it for its fair value.
That may be more or less than what you paid for it.
You should estimate the true cost of replacing it with the same boat in the same condition.
Look at what others are advertised for. If it's not a common design then consider the prices of similar boats that you might have bought at the time.

If your valuation is way above the purchase price, you should make sure you can justify it, perhaps you have improved the boat, or bought it from a rushed seller at end of season etc.
Make sure you have photos that show it's in top condition.

Also keep receipts for everything, because if it has grown in value you might be looking at capital gains tax down the line, particularly if inflation picks up.

Thanks that's reassuring actually as my thinking was based on true cost of replacing like for like based on others. It will be improved by the time it goes back in Feb/March (assuming this weather lets up at some point) and was bought end of season. Capital gains won't be an issue...

 

[Kelpie]

Boats are quite low volume items and as such the 'value' is simply a relfection of what an individual will be prepared to pay for it. This is different to cars where the sheer number of transactions creates an expectation of certain models having certain values.

So, when you bought your boat, you probably took advantage of somebody who needed to sell, ergo you get a good (low) price. But if you wanted to buy a direct replacement, you would have to be prepared to go looking and persuade somebody to sell, and you would inevitably end up paying more. Market forces.

Do insurance companies take this into account?

 

[Ludd]

Thanks that's reassuring actually as my thinking was based on true cost of replacing like for like based on others. It will be improved by the time it goes back in Feb/March (assuming this weather lets up at some point) and was bought end of season. Capital gains won't be an issue...

Your insurer will/would have required a survey. The surveyor will/should have included his assessment of value.Any sum over this I would expect you to have to justify(receipts for equipment,electronics etc)

 

[Richard10002]

In 2006 I bought for £120 k and insured for £130k, with the knowledge of the insurance Co..... no problem. In 2009, I reduced the cover to £110k, as the value had fallen... no problem.

Make sure the insurance company are aware of the situation, and it's up to them to accept/decline cover.

 

[1bobt]

I bought a boat in Greece at the time £ was worth 1.60 euro. I insured it at the paid price in £s. last year had an accident that was nealy a total loss as £ had dropped to 1.06 Insure the boat for the most money that the insurance co will accept

cheers bobt

 

[GeorgeP]

Insurance

Hi

The insurance company will take as high a value as you like for insurance, because that's what sets the insurance premium. However, that just sets the maximum they will pay out. If there is a loss then they will send in a loss adjuster to calculate the fair value.

The insurance industry has been around a long time and seen all the tricks. That's why there are terms like insurable interest and subrogation.

Bear in mind that insurance companies only pay out c. 50% of what they take in. The rest goes on costs (commissions, adminstration). So only insure what you can't afford to lose. But if you only insure the boat for 50% of the fair value, you may find you are only paid 50% of any damages, so check the small print.

G.

 

[jac]

If a recent purchase, then go sale price + the market cost paid of any additions/ improvements. e.g. if you got a boat show discount on a new chartplotter, go for the RRP.

As others have said - you will need to be able to justiofy the price ( as will they.) A few hundred quid one way or other is one thing - a good paint job could explain that but if you start ensuring for thousands more than the fair value then you're just throwing money away.

 

[Phideaux]

The purpose of insurance is to indemnify you against loss and to put you back into the same position as you were before the claim. Insure it for the cost of replacement as a purchaser on the open market. If possible get some examples of similar boats advertised for sale to justify your valuation (I realise that there will be a range of prices for the same model, dependant on age and condition). If going for the upper end of the price range, have justification for doing so such as condition, extra equipment etc.

Do NOT under-insure because should you need to make a claim, the insurance company will almost certainly only payout a proportion of the loss based on the % under-insured.

You may want to arrange cover to include all extras such as agents fees (should you need to commission one to find you a replacement), surveyors fees, any legal costs associated with buying the replacement, perhaps even travel expenses incurred to view potential purchases.

 

[V1701]

Your insurer will/would have required a survey. The surveyor will/should have included his assessment of value.Any sum over this I would expect you to have to justify(receipts for equipment,electronics etc)

There are some companies who don't require a survey though, no? If I have to get a survey would he/she ask what I paid for it? Anyway, yes of course I would expect to have to justify anything over the surveyor's valuation, that makes sense...

Hi

The insurance company will take as high a value as you like for insurance, because that's what sets the insurance premium. However, that just sets the maximum they will pay out. If there is a loss then they will send in a loss adjuster to calculate the fair value.

The insurance industry has been around a long time and seen all the tricks. That's why there are terms like insurable interest and subrogation.

Bear in mind that insurance companies only pay out c. 50% of what they take in. The rest goes on costs (commissions, adminstration). So only insure what you can't afford to lose. But if you only insure the boat for 50% of the fair value, you may find you are only paid 50% of any damages, so check the small print.

G.

I'm not sure I agree with what you're saying here, is it that the insurance co. would be right to take my money and after the event pay me whatever they felt like? Sounds a bit like that to me! I am not trying to "trick" anyone, all I know is that to replace like for like it would cost me significantly more than I paid. If I choose to pay a higher premium based on that fact and the insurance co. take my money, then surely they should honour it if it comes to settling any claim...

 

[sailorman]

There are some companies who don't require a survey though, no? If I have to get a survey would he/she ask what I paid for it? Anyway, yes of course I would expect to have to justify anything over the surveyor's valuation, that makes sense...



I'm not sure I agree with what you're saying here, is it that the insurance co. would be right to take my money and after the event pay me whatever they felt like? Sounds a bit like that to me! I am not trying to "trick" anyone, all I know is that to replace like for like it would cost me significantly more than I paid. If I choose to pay a higher premium based on that fact and the insurance co. take my money, then surely they should honour it if it comes to settling any claim...

[If I choose to pay a higher premium based on that fact and the insurance co. take my money, then surely they should honour it if it comes to settling any claim...]

just work out the rig over the side costs as a % of your insured value. that will give you some idea of what % pay-out to expect. DONT Under-insure the small savings are not worth it.
also consider the "Personal Effects" on board that wont be under normal boat ins. it all adds up,Foulies,L/Js normal clothing items a whole host of stuff, we have £2k of cover added into the boat policy

 

[Phideaux]

I'm not sure I agree with what you're saying here, is it that the insurance co. would be right to take my money and after the event pay me whatever they felt like? Sounds a bit like that to me! I am not trying to "trick" anyone, all I know is that to replace like for like it would cost me significantly more than I paid. If I choose to pay a higher premium based on that fact and the insurance co. take my money, then surely they should honour it if it comes to settling any claim...

Insurance companies will always try to settle for the least amount possible and will often offer a settlement based on what you might have sold it for at the bottom end of the market. This is unacceptable. I had a situation where a nearly new Landrover 14 seat safari with all the expedition extras was stolen and the initial offer was to cover the amount outstanding on the HP (which would have left me £6k out of pocket). Because I'd used a really good insurance broker, he requested that the insurance company pay out for a replacement 4 month old demonstrator direct from Landrover, fully fitted out and delivered. It helped that I also had legal fees insurance (with the same company) and I told the insurance company that I was starting an immediate legal claim not only for the loss of the Landrover, but for consequential losses associated with loss of business. My broker told the insurers that I was deadly serious and this would not just 'go away'. The insurers paid up.

 

[1bobt]

[If I choose to pay a higher premium based on that fact and the insurance co. take my money, then surely they should honour it if it comes to settling any claim...]

just work out the rig over the side costs as a % of your insured value. that will give you some idea of what % pay-out to expect. DONT Under-insure the small savings are not worth it.
also consider the "Personal Effects" on board that wont be under normal boat ins. it all adds up,Foulies,L/Js normal clothing items a whole host of stuff, we have £2k of cover added into the boat policy

Hi
My boats market value is about £60,000 the rig over the side cost 60000 euro that gives a hull and engine value of 10% of the total. Insure the boat at it Max value

 

[lw395]

Hi
My boats market value is about £60,000 the rig over the side cost 60000 euro that gives a hull and engine value of 10% of the total. Insure the boat at it Max value

That seems like a very expensive rig?
Can you break the figure down for us out of interest?
Commiserations if this incident is still a sore point.

But its not unknown for the value of the whole to be less than the sum of replacing some of the parts new.
A ten year old car would often be a write-off if it needs a new engine fitted fr'instance...I know this, I should have written mine off once!

You can up the value of your insurance, but the insurers are still free to write the boat off at its 'market value' which you may have to argue about.
It's good to have some kind of evidence of the value. If you have any doubts it is a good idea to have a chat with a knowledgeable broker and explain why you place a higher value on your boat. I have a 'modern classic' bike which has increased in value because I know I could sell it in Germany or Italy, I'm happy to have paid a little more for the 'agreed value' insurance through a specialist broker.
Whereas with my car, I take the cheapest quote from any outfit where the service seems reasonable. I know full well they will base any payout on a trade-in price for an average example of the same age and model.

 

[koalaman]

Why not ask the insurance company

I would recommend you ask the insurance companies how they pay out in the event of a claim. I did this when getting quotes. Some would only insure for the market value, it was up to me to say what i thought that was now but they would only pay what they thought it was worth at time of claim. The policy I ended up going for (through lifesure) though says that in the event of total loss they will pay the agreed value thats on the schedule so long as it is no more than what I paid for it. Fair enough.

I wouldnt recomend insuring it for more than you paid for it in the hope they will settle for the correct amount in the end. i doubt insurance companies will be fooled by that and it could constitute giving false information which then gives the insurance company a potential chance to get out of a claim.

In summery, just ask your insurers, they all seem to have slightly different ways of settling so rather than guessing how they will do it, just ask. They may even have different policies which they can offer to suit your needs.