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Written by eboatloans and Peter Laczko Insurnace

AS SEEN IN THE SEPT/OCT 2006 ISSUE

“Fickle Financing” Investing in the right boat for you.

Boating is a social activity, so family and friends should be involved in the selection process. Determine what activities the crew enjoys, then select models that fit those needs. Most boats are multi-faceted. They can be fished hard all day, and serve well as social cruisers during the evening.

Narrow down "must-haves" verse "can-do-without." Decide on a monthly budget for boat ownership and try to stick to it, but don't sacrifice necessity for a few dollars which could cost you convenience later on. Since you’ll often be inviting guests, plan for extra room.

Question boating friends for tips. Pick up a few relevant magazines, visit local dealers, and study online boat reviews. Better yet, attend local boat shows. You'll quickly find a number of brands that fit your needs and budget.

So which boat is best? Well, all boats sold in the U.S. must meet Coast Guard safety standards. And don't think you're making a lifelong commitment. It's not a marriage; it's more like an enjoyable temporary relationship. That's because most boat owners trade up as their skill level and needs change.

Many boats are sold prepackaged with motor and trailer. These manufacturers have been careful to outfit such products for the comfort of the average boater... and the attractive prices reflect cost savings passed on to buyers. Generally, the packaged units will offer a choice in power.

Remember that the dealer that sells the boat will be your partner for advice and service. Your dealer rep should be willing to listen to what you want and then make recommendations based on your personal preferences. When the boat needs service or repairs, the dealer needs to stand behind the sale. The point is, when shopping for a boat, also shop for the dealer you have the most confidence in.

Once a boat is purchased, what will be the estimated yearly operating expenses? Most boat owners set an annual budget for boating. Items to consider include insurance, dockage, fuel, maintenance, etc. Generally, the cost of all of these items increases relative to the size of the boat.

One of the misconceptions about power boating is that fuel bills are always astronomical. They can be, but the reality is that people don't actually operate their engine(s) for as many hours per year as it seems. Much of the time on the water is spent at anchor, fishing, at the marina, or cruising at idle. In any event, the cost to operate and maintain an average boat divided by the number of days in a year’s use, is reasonable.

This season, literally thousands of boats will be on display at local boat shows across the state. Many experienced boaters believe boat shows are the best place to shop intelligently for boats and related products. Shows offer comparison shopping for completely packaged rigs, but also for motors, trailers, accessories, gear, and everything else that goes along with boating and fishing. The concentration of exhibitors is a real time-saver for savvy buyers where comparisons can be made in a few hours, as opposed to days or weeks. Boat shows also bring in experts from manufacturers or dealerships. These professionals can answer the specific questions you may have about power, speed, rigging, and fuel economy. Experts help in other ways, too. Describe your needs to them and they'll offer advice on which model or product is best for you.

As far as boat show shopping tips, wear comfortable shoes. If you're a first-time buyer, boat shows help narrow the choices. Before you stroll the aisles, it's a good idea to decide what you specifically want to accomplish. Show directories, generally available at the exhibit entrance, categorize boats and identify booth locations. Plan to visit your target brands first so that after viewing the entire show, you can return to your first choices for a closer look. If you're comparison shopping for features and price, it helps to make up a list of points ahead of time. Decide what's important to you in the size range you prefer. If applicable, remember to ask about trade-in possibilities. The boat show is a great place to shop and dream, and a logical place to find your first or next boat.

When it comes to financing, there are many ways to purchase a boat. As in any loan, key items are down payment, interest rate, terms, and the small print. The down payment can depend upon the lender, the age of the boat, what you plan to do with it, if it is registered with the state or federally documented, and can be as low as 10% or as high as 25% of the loan amount.

After you have decided on the source of the boat loan, you will need to be "approved." The paperwork called a "loan application" is the lender’s source of your information. Complete this form in its entirety. Most lenders will also require proof of income, and credit information. The interest rate will vary and may either be fixed or variable. If you want to know exactly what your monthly payment will be, a fixed-rate loan is the way to go. If you’re buying a large boat and this is the only loan you can get, go for the variable-rate loan, which may have a lower start up interest rate but "goes with the flow." Interest rates often rise. Either way, determine if the interest is calculated on a per day basis or over the life of the loan. Also, be aware of any early payoff penalties and ask what it will cost you to get into the loan- are there "points" which means a percentage of the loan to be paid as an origination fee. How long are you willing to pay for the boat? The longer the term, the longer it will take you to acquire equity. This can get complicated depending on your cash investment, your income, and how long you stay enamored with a particular boat. The term usually ranges between five and twenty-five years.

Still confused? Call us. We’re here to help.

Jeff Scott
305.818.3700
www.eboatloans.com

“Insurance Impediments”
Overcoming the fears

Over recent years, devastating storms have wreaked havoc on Florida’s insurance market, with big name companies not excluded from the nearly panicked state of affairs. Newspaper headlines have read, “Insurance companies bankrupt!”- “Insurance companies no longer providing coverage for Sunshine State boat owners”- “Coverage no longer available for Florida vessels.”

With boat show season now upon us, buyers considering the purchase of a new or pre-owned vessel may be wondering what in the world is really going on, and will they in fact be able to obtain sufficient coverage for their prized possession?

What is clear is that the trend across the board is for insurance companies to completely stop offering hurricane coverage, or at the very least, to add a separate and often astronomical deductible for storm-incurred damages. Companies still offering hurricane coverage have already taken substantial steps to protect their financial status by decreasing the overall length and value of the boats they are willing to insure. For example, Progressive will only cover boats to 30 ft., and with no more than $100,000 in hull coverage. Safeco has dropped down to 26 ft. with a hull value no greater than $150,000, while American Modern Insurance is down to 30 ft. and no more than $150,000, and that’s only if the boat is stored ten or more miles from the coastline. As an insurance agent in South Florida, determining which company is willing to provide coverage for which boat is like solving a Rubik’s Cube.

There are other, less popular companies willing to write policies for vessels up to 32 ft. and valued to $200,000, but they will not provide coverage in Monroe, Dade, Broward, or Palm Beach Counties, which brings me to the next industry trend. Along with reduced hull size and value, the vast majority of insurance companies are no longer offering coverage in certain counties. Safeco will not write policies in Collier, Monroe, and Dade Counties. They will insure a boat in Broward County, but only if the policy holder also holds a Safeco auto insurance policy. With all of these trends taking place, you’re probably wondering what an existing or new boat owner is to do when faced with these insurance challenges.

All hope is not lost. There are companies out there, like Great Lakes Reinsurance, which are still willing to provide coverage for anything beyond the restricted sizes and values all the way up to $650,000, but like most insurance policies nowadays, this sort of coverage is not cheap! When dealing with companies willing to write policies with few exemptions, I would highly recommend boat owners ask exactly what their exclusions are now that many of the big name brands are no longer providing coverage for any size vessel in Florida.

As a rule, regardless of who you call for an insurance quote, make sure you have as much information on the vessel you plan on insuring before heading out in search of a policy. Is it a brand new vessel or a pre-owned? A number of companies offer a total replacement policy in the event of a theft or after an accident if the boat is not repairable, that is if the boat is less than two years old. Some insurance companies will purchase a brand new boat within the first five years of the policy or will reimburse you the purchase price. Pre-owned boats, on the other hand, can be covered for an agreed value or what the insurance companies call, the actual cash value, depending on exactly how old the boat is.

Will the boat be financed? Are you planning on storing the boat on a trailer or in a wet slip? Where will the boat be kept? Will you be trailering or navigating the boat out of state waters? All of these factors play a major role in obtaining the most thorough coverage at the fairest rates. Some insurance companies also offer a discount for owners holding a captain’s license or who have completed boating safety courses.

Other factors to consider when looking for coverage should include an overall assessment of the company. How is their responsiveness, availability, and overall customer service? It’s critical that your insurance company responds when you really need assistance. When you have an accident, need claims service, or emergency services, is help close by? You'll want to be treated fairly and promptly, so seek out a company with helpful employees to serve you wherever and whenever you need. Choose a company that's been there and will be there in the future – a company with a strong reputation and high standards. Lastly, since your insurance needs are unique, choose a company with a wide variety of coverage options. A company’s menu of products should accommodate a circle of protection for your needs both today and tomorrow. Some companies may tell you insurance only comes down to price, but it’s also important to understand the policy and services promised behind the price, and to know what discounts may be available. You’ll want to find the balance between financial security and price point when choosing your coverage options. Don't accept less protection just to get a lower rate. Make sure you get the protection you need.

In conclusion, it is very important that you carefully read your existing or any potential insurance policies very carefully, especially the declaration and exclusion pages. If you are a current boat owner, verify that your existing policy provides adequate storm coverage. If for whatever reason you do not thoroughly comprehend what you are reading, immediately contact your agent for additional information before it is too late. Peace of mind is a crucial element to enjoying your time on the water- especially in Florida!

For additional information, our dedicated staff always welcomes your questions, comments, or concerns.

Peter Laczko Insurance Inc.
561.333.5050
www.InsureYourToy.com

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