Boat Motor Coverage
Each insurance company will vary on how your motor is covered. Due to the high probability of loss, damage to
stern drives and outboards is one of the most difficult items faced by you and us as your insurance agent. If
you have not already reviewed the
partial loss section, we recommend you review the items in this
section that explain Replacement Cost and Depreciated Value.
Engines can be insured on replacement cost or depreciated value. If the boat insurance policy is written on
actual cash value, then the engine will always be depreciated in the event of a loss. If the boat insurance
policy is written on agreed value, some boat insurance companies will replace new for old without a deduction
for depreciation, but only until the engine becomes a certain age.
The boat insurance company that uses agreed value may repair or replace a newer engine without deduction for depreciation. As the engine ages, the
replacement cost may change to depreciated value. The age that a boat insurance company will apply
depreciated value varies. Some will apply depreciated value on all outboards or stern drives regardless of
age. Others change to depreciated value at age two, five or seven. The age when depreciated value is applied
can be different for outboards, stern drives and inboards. There can also be differences between gasoline and
diesel engines. See how our different programs cover loss to engines.
Example: An 8 year old stern drive boat with a $500 hull deductible that hits a submerged object. The replacement
cost to the stern drive is $8000.
Insurance company A provides replacement cost coverage until the stern drive is six years old. They will apply
60% depreciation (7.5% per year) to the $8000 replacement drive and then apply the $500 deductible. Insurance
company A will pay $2700 ($8,000 less $4,800 depreciation, less $500 hull deductible).
Insurance company B provides replacement cost coverage until the stern drive is 10 years old. They will pay
$7500 ($8000 less the $500 hull deductible).
There are other items to consider. For example, if the stern drive has to be replaced, most companies will
apply a reduced depreciation if you agree to a remanufactured stern drive. This can save thousands of dollars
in depreciation. We represent one insurance company that applies no depreciation for a remanufactured unit.
Also, depreciation is only applied to parts (real property). Depreciation is not applied to labor, storage
charges and other non real property items.
Review our in-depth Boat Insurance Guide.
See our side by side comparison of the programs represented
by United Marine.
