Boat Insurance: 5 Mistakes That Get Your Claim Denied

Video Summary

In this video hosted by Maryline Bossar of Current Yachts, marine insurance experts John Jarvie and Hugo Hanham highlight five critical mistakes that can invalidate a boat’s insurance policy during ordinary situations. The first major pitfall involves signing boatyard work orders containing waivers of subrogation, which prevent insurance companies from recovering damages from the yard and lead to denied claims. Additionally, boat owners often assume permissive use applies as it does with cars, but many marine policies require named operators, meaning unlisted captains or drivers will leave accidents uncovered.

The video further warns against confusing routine towing with salvage operations, as accepting a tow line while in perceived danger can legally result in massive salvage bills costing up to half the vessel's total value. Furthermore, buying cheap, unrated policies can leave owners unprotected if the insurer goes out of business, while hidden exclusions like wreck removal can trigger sudden, five-figure out-of-pocket costs if a boat sinks. Finally, paying crew members or running charters without proper commercial endorsements exposes owners to severe maritime employment liabilities that standard policies exclude.

To prevent these costly coverage gaps, the experts advise carrying a dedicated towing membership and explicitly notifying a specialist marine broker before signing boatyard agreements, allowing unlisted drivers, or accepting money onboard. They also caution that common policy exclusions often apply to cyber hacking, government fines, and slow fuel leaks. Ultimately, maintaining an active, transparent relationship with a responsive marine insurance broker is presented as the single best defense against losing coverage when filing a claim.

Video Transcript

How fully insured boats may still NOT be covered

You can do everything right. Buy the good policy from an A-rated carrier and pay your premium on time and still end up with nothing when you file a claim. Because there's a handful of mistakes that can cost you serious money. They actually void your coverage entirely. And most of them happen in totally ordinary moments like hauling your boat out, handing someone the keys, or accepting a tow.

We recently sat down with two marine insurance experts for our podcast. John Jarvie from Overseas Insurance and Hugo Hanham from the Hanham Agency. They shared with us the traps they see boaters fall into again and again. These are the five that can leave a fully insured boat completely unprotected.

Number one even shocked me. I'm Maryline Bossar, co-founder of the yacht brokerage firm Current Yachts. If you already know the basics of boat insurance, agreed value, deductibles, liability limits... Good, because this isn't that kind of video. What I'm sharing today isn't in any brochure. Stay until the end because this entire video could genuinely save your boat.

Mistake 1: Signing the boatyard work order

Signing a boatyard work order without telling your insurer. Here is the trap. Almost every shipyard hands you a work order before they haul or service your boat. Buried in that document is usually a three-part surprise: a hold harmless, a limitation of liability, and a waiver of subrogation.

Why a waiver of subrogation kills your claim

In plain English, you're agreeing that if the yard damages your boat, even if it's entirely their fault, even if their strap breaks and they drop your boat on the concrete, that you won't hold them responsible.

Now, here is why that voids your coverage. Your insurance company has a right to pay your claim and then go recover that money from the party who caused the accident. That's called subrogation. But you just signed that right away. Your insurer looks at it and says, "We can't recover from the yard, so we're not paying." Your policy is effectively void for that loss.

As John put it, the boatyards tell him, "Hey, nobody else here has a problem except your clients, John, because his clients are the only ones who actually read it." The fix is simple. Before you sign anything at the yard, tell your insurance broker. A good one can get the insurer's approval or add an endorsement so you're actually covered while your boat is out of the water.

Mistake 2: Letting the wrong person drive

Assuming your boat insurance works like your car insurance when someone else is at the helm. With your car, if you hand a friend the keys, they're usually covered. That's permissive use. Boat policies are often not like that, especially in hurricane prone areas like the southeast. Many policies are named operator, meaning only the specific people listed are covered to drive.

Real example from a recent deal where we represented the buyers: An owner hired a captain to deliver their boat to the survey. On the way, the captain found out the catamaran wasn't ICW compliant. The boat hit a bridge and the mast came down. The claim was denied because that delivery captain wasn't a named operator on the policy—a five figure loss uncovered over a paperwork technicality.

The fix: know whether your policy is named operator and if it is, preload it with the three or four people who might realistically run your boat this year. It takes one phone call.

Mistake 3: Accepting a tow that becomes a salvage

Confusing a friendly tow with a salvage claim. Imagine this: Your engine quits in a channel. You're drifting and you call for help on channel 16. In Florida especially, you'll have a dozen boats circling you in minutes and someone's going to ask you to confirm you're in danger and confirm this is a salvage.

Here is what most boaters don't realize: The moment you accept a line while your boat is considered in danger, that can legally become a salvage. And a salvage bill can run up to half or even the entire value of your boat for what felt like a five-minute tow.

Here is our recommendation: Do not accept salvage unless you truly have to. The fix: Carry towing membership like BoatUS or SeaTow. It's about $150 a year, so ordinary breakdowns are just a tow, not a salvage. And know the difference before you're the one drifting.

Mistake 4: Buying the cheapest policy

Shopping on price alone and buying what our expert Hugo called an expensive piece of paper. Two cheap policy traps came up:

First, unrated carriers. Since the big hurricanes of 2017, a wave of insurers with no financial strength rating and no regulation have appeared, especially for windstorm coverage in the Bahamas and the Caribbean. They look like a bargain until there's a hurricane. You file your claim and they simply say, "Sorry, we're out of business. No payout, no recourse."

Second, hidden exclusions. Hugo told us about an owner whose cheaper policy excluded wreck removal. Their boat sank. The carrier paid out the whole value, but then the owner had to pay out of their own pocket to raise the boat with 10 feet of mast taken out of the water at the marina, tow it, and dispose of it. Here is a five figure surprise you didn't see coming. Still jazzed about that cheaper policy you picked?

The fix? Compare what's actually covered, not just the premium. And Google the carrier's claim reputation before you sign. The whole point of insurance is the claim.

Mistake 5: Paying someone on your boat

Paying a person on board without the right coverage. The second you pay someone—a mate, a captain, or you let someone run a charter to offset expenses—your liability exposure jumps enormously because now you're in maritime employment law.

And here's the trap: Most standard policies specifically exclude paid crew liability and charter use unless you add it. So, if a paid hand gets hurt and it's a serious injury, the lawsuit is coming and you may not have coverage for it. To charter your boat, you may have to redo it as a commercial vessel and add crew and commercial liability endorsements. Yes, it costs more, but that is the cost of doing it right.

The fix: If any money is changing hands around your boat, tell your broker before it does and get charter and paid crew liability added.

Quick hits: cyber, fines, and fuel seepage

Three fast ones the experts flagged that surprise most people:

• Most policies exclude cyber entirely. Hacking your systems or your onboard data isn't covered.

• Government fines and punitive damages like a pollution or protected sea grass fine usually aren't covered either.

• A slow fuel seep into the harbor isn't covered, even though a sudden accidental spill usually is.

So read your exclusions carefully.

The one habit that prevents all five

Notice the thread running through all five mistakes. Every single one of these is avoided the same way: by having a specialist marine insurance broker and telling them what you're doing before you do it, not after. As both experts said, if an insurance broker isn't responsive before you buy the policy, it will get worse when you have a claim. So, choose your insurance partner wisely.

To do that, we created a free yacht insurance checklist for you with the exact questions to ask an insurance broker. Get a free copy at the link below. And I also share the link to our online marine directory. That's where you can find the contacts of specialists we trust, including the two experts I mentioned in this video.

If we helped save you a headache, please hit the like button and tell us in the comments which ones of these mistakes have you learned the hard way. And if you want the full breakdown on marine insurance basics, watch our marine insurance 101 video next. Thanks for watching. I will see you there.