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Let's look at what you'll need to do before putting on offer on your next boat.
Photo, Getty Images/Alexum
When you’re searching for your next boat, chances are you’re way more focused on finding the right model, or inspecting the mechanics or the rigging – or even counting the number of rocket launchers on the T-top – than thinking about insurance and financing. But it’s critical to look into both of these before you make an offer on that dream boat. Here’s why.
Correct Coverage
According to Rebecca Reinaker, assistant product manager for GEICO Marine Insurance, most boat buyers can get marine insurance directly from major insurance companies such as GEICO Marine. For most people, the process is generally straightforward: You go online (or call) at your convenience, plug in some details, and get a quote or sign up for a policy.
But older boats and larger boats, or boats built from nonfiberglass materials, such as wood or metal, can be harder to insure. Many insurance companies have tightened their requirements and will no longer insure boats more than 20 years old or more than 40 feet. And they may not bind policies during hurricane season if there’s a named storm headed to where the boat is located. Some companies also place geographic restrictions on new policies – in some cases you have to be above a certain latitude during hurricane season to qualify.
Part of the reason for this tightening by the insurance companies is because, during Covid, when so many people got into boating and bought their first boats, there were more than 1 million first-time boat buyers from 2020 through 2022, according to the National Marine Manufacturers Association. Insurance companies experienced an increase in claims from damages to these boats in accidents, groundings, and so on, which happened on a more frequent basis among new, untrained boaters. The companies raised their requirements seeking insureds with more boating experience, who owned newer boats, and who owned smaller boats that tend to have less costly payouts.
According to the United States Coast Guard’s annual report on boating accidents, the total number of boating accidents increased by 26.3% from 2019 to 2020. While the numbers the following year showed a decrease, the damage to the insurance market had been done, and rates reflected these numbers. Bottom line: Do your homework before you fall in love with an older boat, and make sure you can get coverage before you make an offer.
Insurance Challenges
The best way to begin the process of getting insurance is to check with the companies that carry your car or homeowner’s insurance and see if you can “bundle” your policies. Many marine insurance companies are underwritten by major insurance companies, such as GEICO. If you already have insurance with one of them, the insurer can often add boats, RVs, motorcycles, and other items, and you may get a better rate.
You may choose to work with a marine insurance broker rather than doing the legwork yourself, which is often helpful as the insurance broker will be well-versed in the market and may know of options and special opportunities that you might miss. For bigger or older boats, insurance companies often have complicated vetting systems in place online, so an insurance broker’s phone call, or your phone call if you choose not to work with an insurance broker, can hold much more weight than simply filling out online applications. Your yacht broker will probably have a list of companies and insurance brokers to reach out to as well. The insurance broker will ask for a copy of the listing and the vessel’s hull identification number before providing you with a quote. They may even ask you for a signed purchase-and-sale agreement (your accepted offer on the boat) so that they have an idea of what your financial investment in the boat will be.
Be prepared for your driving record to be assessed, your boating history, and whether you’ve had vessel, auto, or homeowner claims, and even whether you have a criminal record or a poor credit history, to be considered. Certain things about the boat may limit its insurability, too, such as claim history, inboard gasoline engines deemed to be unsafe, high engine hours, or a salvage title. An insurance broker will have suggestions for overcoming these hurdles.
If you’re active or retired military, there are many financing and insurance opportunities for veterans that civilian buyers may be unable to access. Let your insurance company or broker know right away if you or an immediate family member has served.
Sometimes an insurance quote will come with caveats. If, for example, you’re looking at a larger or older boat, the company may require a survey that values the boat at or above the same value for which you’re asking it to be covered. If something major comes up on your survey, you may expect an “insure in place” situation, which means the company will bind you on the condition that you fix whatever needs to be repaired before you leave the dock or within a certain amount of time. Typically, you’ll submit photos and receipts or a survey addendum to the insurance company once the repairs are completed.
Keep in mind that some insurance companies will have different ways to determine value. A boat may have been surveyed for $150,000, but if the BUC value is $125,000, you may have trouble getting it insured at the survey value. This is largely because a survey takes into consideration all the extra equipment on a boat (tenders, electronics, and other upgrades) while BUC and NADA just reflect the hull value based on depreciation since the boat was built.
If you’re in an area like Florida that is hurricane-prone, the insurance company may request a written “hurricane plan.” This is usually just a short document stating where the boat will be kept in a storm, who will be looking after her, whether she’ll be hauled out of the water (some companies require a boat to be dry-docked), and whether you’ll submit photos of the docking configuration, and any other storm-related plans you’ve made to keep your boat safe. Ask the company to provide you with a sample of what it’s looking for. If the insurance company requires your boat to be dry-docked during a storm, talk to local boatyards and facilities that offer this service and, if needed, make a deposit to get on its priority list before the start of hurricane season.
Boat shows are a great place to find good deals on new boats, but be sure to have your financing and insurance lined up before putting in an offer. Photo, Miami International Boat Show
How Experienced Are You?
Another insurance hurdle you may face is your level of experience as a boater. If you’ve owned boats before or taken classes, you’re a lower risk. The insurance company will look at how many years of experience you have and on what types of boats. If you’ve only had experience bass fishing on a lake but now you’re buying a 50-foot sportfishing boat, the insurance company may require training as part of the terms.
Taking a basic boating course through the BoatU.S. Foundation, U.S. Power Squadrons or the U.S. Coast Guard Auxiliary is a great starting point, but hiring a professional captain is worth its weight in gold (and, again, often a requirement). In addition, you can find on-water training courses taught by U.S. Coast Guard-licensed captains through the BoatU.S. On-Water Training Locator. The insurance company will expect you to complete a certain number of days (usually two days to a couple of weeks) of training with a captain and will require that the captain signs off on a course plan or letter before you run the boat on your own.
If it looks like this is going to be a requirement for your insurance, talk to captains before and during the offer process. You’ll need to ask about their level of experience and their licensure, provide their license information to the insurance company, confirm their rates, and make sure you have time scheduled in advance to work with them. This is important because putting your training off could be grounds for your insurance being canceled. Captains often travel for long periods on boat deliveries and can be booked out months in advance. So find a captain who’ll work with you, pay them a deposit, and get time scheduled for training before you make an offer on the boat.
Assessing Value
When considering quotes from different companies, be sure you’re comparing apples to apples. Understand the difference between agreed value (the policy is more expensive but pays more) and actual cash value (based on depreciation and what your boat was worth at the time of the incident). Some policies automatically include salvage/wreck removal coverage; others may have that as an option to help keep policy prices lower. (Note: Some states, such as Hawaii, now require salvage/wreck removal coverage in the event of a catastrophic loss.)
Does the policy include liability in case you’re found negligent of property or bodily damage? What about things like on-water towing or roadside assistance for breakdowns? (AAA covers your vehicle but not your boat/trailer.) Will the insurance company pay the towing company directly, or do you need to wait for reimbursement? And does the policy cover your personal effects, such as fishing gear, water skis/wakeboards, or even phones and electronics?
The bottom line? Don’t just look at price, says Reinaker. “Read the fine print, know what the policy does and doesn’t cover. And if there’s coverage you need that isn’t part of the quote, you can often add it onto a policy for a small fee.”
Current Interest Rates & Requirements
At one point, the Federal Reserve System forecast four interest rate cuts in 2025. “We believe now, even with the uncertainty currently in the market, that we may see a reduction in rates once, perhaps twice this year,” says Laurie Kiser, vice president of Ocean Point Marine Lending in Annapolis, Maryland. “No one was predicting big reductions, but we do think we’ll see a little relief before the end of the year.”
She advises today’s borrowers against delaying purchases because refinancing is easier than ever and can usually be done with no fees, points, or closing costs. She also advises bringing a financial representative into the discussions before serious shopping begins. “If they know your lifestyle goals, they can advise what programs are available, any pitfalls, and tips to be sure the best picture is presented to the bank,” Kiser says. Accept any prequalification offers from a lender, she advises, as offers with financial backing set are more appealing to most sellers. — RICH ARMSTRONG
Money Talks
Whether buying a new or used boat, you’ll also want to get your financing in place before you put in an offer. While some people are able to pay with cash, especially for smaller or older boats, many buyers need to line up a loan. Getting a boat loan is a bit more involved than buying a vehicle, but not as involved as buying a home. However, the process is similar to both.
If you’re planning to finance your boat (traditional boat loans are generally a minimum of $10,000), start by getting preapproved. According to Gregory Feldmann, president of Trident Funding, a recreational loan company in the marine and RV spaces and the lending partner for BoatU.S., the preapproval process generally consists of a basic application about yourself. Trident then does a “soft” credit pull, which tells the company about your credit score, credit history, and trade line data (e.g., debt, payments) without affecting your credit.
For larger and more expensive boats purchased through a yacht broker, it’s highly likely that brokers and sellers will start asking for proof-of-financing letters when you make an offer, or even when the broker takes you on as a buyer’s broker, if you use one. Keep in mind that a buyer’s broker may spend thousands of dollars traveling to show you boats and hundreds of hours doing research for you, meeting with you, talking with you, previewing boats for you, and so on. The buyer’s broker doesn’t get paid for any of this until the boat closes, so a buyer’s broker expecting you to have your finances in place is perfectly reasonable. It’s standard practice in real estate, and yacht brokers are incorporating this into the shopping process.
If you’re buying through a yacht broker, you’ll generally need 10% of the purchase amount ready immediately to be placed in your yacht broker’s escrow account upon the offer being accepted. When you do this, you’re guaranteeing that you’re able to pay the rest of it. The deposit may be refundable, but it’s not a placeholder until you “find” the rest of the money.
In addition to this deposit you place in escrow for the boat purchase (if using a broker), finance companies will require a 10% to 20% down payment of the balance of the loan. Marine lending is high risk for lenders, so be prepared to provide tax forms, income verification, and other pertinent information including a purchase agreement, proof of down payment, and details about the boat to apply for the loan.
Once you decide to move forward with the loan, you’ll go to the lender (often through a company like Trident Funding that has a network of lenders to find the best rates for the individual borrower). The lender does a “hard pull” on your credit (which may temporarily lower your credit score) and will work with you to complete all of the documentation required by the lender. Like getting insurance, the buyer’s experience might come into play here, too. It’s a positive if you have a history of paying installment loans and especially if you’ve ever had a boat loan previously. Though Feldmann says a lack of installment loan history won’t necessarily disqualify you.
“Boat loans tend to have slightly tighter eligibility than buying a car,” he says. “Most lenders will look for a credit score of at least 720, but their preference is often 770 or higher.” That’s because boats are considered a luxury item and there aren’t as many lenders in the space compared to auto, for example. In addition, boats aren’t as liquid (easy to sell) as a car would be if the buyer defaults on the loan. For that same reason, lenders like to see boats newer than 20 years old. Older boats have more limited options for funding and often require going to a smaller niche lender versus a large national lender.
Buyers will sometimes acquire funding in less traditional ways such as taking out a home-equity line of credit or borrowing against retirement funds. For smaller amounts, they might even consider a personal loan. These secured loans can be easier to obtain than a traditional boat loan. Credit unions may also have more liberal lending policies.
Once you have the insurance and financing in place, you’re ready to make an offer on that dream boat once you find it. That’s the subject of our next article in this “Dollars & Sense” series; we’ll talk about how to make an offer on a boat, and whether to use a yacht broker or do the negotiation yourself.
