August 8th, 2017
There is a bit of confusion and misinformation circulating regarding deductibles for insurance. I have dedicated this post to addressing the most common misconceptions and frequently asked questions.
Why are there deductibles on an insurance policy?
The deductible is the amount or portion that you will have to pay on any claim. These exist in insurance for two main reasons: to reduce risky behaviour and for financial stability. If there was no deductible conventional wisdom holds that boat owners may take greater risks if they have nothing to lose.
A deductible reduces this risk because the owner now has a financial incentive to stay safe. If insurance companies were paying the full cost of claims without a deductible this would increase the cost of insurance for everyone.
Deductibles provide a measure of rate stability because damage that is less than the deductible is not covered. At the same time owners can reduce their annual premiums by opting for a higher deductible.
Do I have to pay a deductible if I’m not at fault?
On an insurance policy, the short answer is YES.
On claims a deductible is applied regardless of fault. There are subtle differences between some companies but as a general rule that is how insurance works.
If you are not at fault then after repairs are completed your insurance company will try to recover their expenses from the at fault party and if successful you are reimbursed for the deductible you paid. In rare cases the same insurance company covers both boats involved in a incident and they are likely to waive the deductible of the innocent party.
I have four different deductibles shown on my policy. Are they applied at once?
Boat insurance policies will usually have one deductible for the boat with lower deductibles for personal effects, navigation equipment, equipment stored on shore etc.
If you have a claim then in most cases only one deductible is applied. Let’s say you collide with another boat and at the same time your prescription glasses fall overboard. Both are paid as one claim and the higher of the two deductibles is applied.
If the boat damage is minor it may benefit you to just claim the personal effects to get a lower deductible on the claim overall. Your boat insurance broker can help you make that decision after a loss.
Why does the adjuster say I have to pay two deductibles?
Each loss you claim is treated as a separate incident and a deductible applies for each incident. If there is more than one incident then more than one deductible applies.
Let’s say a person breaks into your boat by smashing a hatch and they steal equipment from the boat. A few days later a raccoon finds the open hatch and moves on board damaging the interior. These are separate incidents so one deductible applies to theft and a second for the animal damage.
I have also heard from racers that don’t understand why two collisions are treated as separate claims when they occurred in the same race. It is possible that two collisions could occur as part of a single incident. However, if you are hit during the start then hit again at the windward mark then these are separate incidents and a deductible applies to each one.
Do I pay the deductible if I have a total loss?
In most cases no deductible is applied for a total loss or a constructive total loss claim but you need to check your policy wording.
If you have a specific question about deductibles that was not addressed contact me at firstname.lastname@example.org
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