Today, using peer-to-peer platforms, you can ask a stranger to cook you dinner, move your couch, or walk your dog. There are even those who'll loan you their boat for the afternoon.
Given the meteoric rise of companies like Airbnb and Uber, it's clear that peer-to-peer (P2P) services are here to stay. Seemingly, everyone wins: The owner earns extra income and the renter gets better value for the money. However, there's an element of "stranger danger" to overcome for people to entrust their boats, homes, cars, and poodles to just anyone. P2P platforms have bridged this trust gap by using online profiles, reviews, and most importantly, insurance.
In the last six years, more than a dozen startups, billing themselves as "Airbnb for boats," have launched around the world. They've all had to grapple with how to best provide insurance. Insurers have been tentative to underwrite P2P rentals, not only because P2P is uncharted water for the industry but also because boating insurance has its own particular set of challenges.
"It's kind of like the Wild West," said Mike Pellerin, Vice President of Underwriting for BoatUS Marine Insurance. "There's just less information available. In the auto world, insurance is mandatory. Everybody has it. There's a huge amount of data out there to research claims and loss history. But with this type of boat insurance, you're really going into it somewhat blindly."
In 2015, BoatUS and Boatbound (now Boatsetter) introduced one of the first P2P insurance policies, an agreement that covered damage and liability while a boat was being rented over a P2P platform. "We knew it would be a risk, and certainly we're learning from it," said Pellerin. "But as a whole, I think the idea is terrific. It gives access to people who might never have had access to boats before, and it also lets people test the waters to see if boating is right for them."
Peer-to-peer, apples-to-oranges Insurance offerings vary significantly from platform to platform, and in many cases, from boat to boat. For example, Boatsetter provides the BoatUS Peer-to- Peer Boat Rental Policy and on-water assistance through TowBoatUS with every rental. On the other hand, other companies, like GetMyBoat, require the boat owner to hold the appropriate insurance. Click&Boat, a European P2P platform, requires boat owners to have their own insurance for boat rentals and offers optional assistance, repatriation, and cancellation insurance to renters.
To further complicate things, there are also important differences between P2P boating insurance and recreational boat owner's insurance. "During the rental you could be subject to different insurance terms than what you may be used to," said Pellerin. For instance, the geographical area you're permitted to boat in is likely to be different. Boat owners and renters should do their due diligence and understand their insurance coverage before renting P2P.
Tips For Reducing Risk & Liability On The Water
- Ensure your boat has all the required safety equipment.
- Request a trip plan.
- Do a detailed walk through and test drive with renters.
- Create your own "renter's manual" with safety and basic boat operation checklists, emergency contact information, and what to do in case of an accident.
- Consider additional insurance that may increase your liability coverage on the water (e.g. umbrella and homeowners insurance).
- In a welcome email, send the renter this link to the free online boating safety courses offered by the BoatUS Foundation for Boating Safety and Clean Water: BoatUS.org/Courses.
- Take a boating course, like the free state-specific Boating Safety Course offered by the BoatUS Foundation
- Hire a captain, especially if you're renting a boat that is beyond your experience. A paid professional will not only make these safer, but you'll have an opportunity to learn new skills.
- Choose a service like Boatsetter that offers customized P2P insurance and includes on-water assistance.
- Inspect the boat. If it looks like there's a lot of deferred maintenance or if it's lacking required safety equipment, you may want to pass.
Questions A Boat Owner Should Ask
According to Boatsetter, in 2018 the average owner grossed $4,600 in rental income on the platform. It's one way to offset the costs of moorage and maintenance, though regional and demand differences make that figure vary widely. If you're thinking about renting your boat out on a P2P rental platform, here are the insurance questions to ask:
Does my existing insurance cover rentals?
Almost all recreational boat insurance policies prohibit rentals, which leaves boat owners with two other options. The first is through a platform like Boatsetter that provides P2P insurance. Many platforms, however, do not offer insurance or recommend insurance providers.
"Essentially the only other option," Pellerin said, "is to get a charter policy that allows for bareboat charters. Otherwise you and your renter may not be covered at all. These types of policies are typically more expensive and harder to find."
How will my boat be valued in case of a total loss?
One of the marked differences between P2P policies and recreational policies is how the boat is valued in the case of a total loss (e.g., major fire, sinking).
"The majority of folks have agreed value policies on their boats, but the P2P policy is an actual cash value policy," said Pellerin. The difference is that an actual-cash-value policy accounts for depreciation.
"Let's say the agreed value on a recreational policy is $30,000. That's what would be paid out if the boat is a total loss. If you have a total loss during a rental, which is covered by a P2P policy, the value will be based on actual cash value. If the market industry reference material (BUC or NADA) says that boat is worth $25,000, that's what would be paid out. So when your boat is used in a P2P program, the insured value may be less.
"With that said," Pellerin continued, "there are very few total-loss claims that we see come through the peer-topeer program. Most losses are things like striking submerged objects, striking the ground, hitting the dock, and dock rash scenarios."
How much liability insurance do I need?
The BoatUS Peer-to-Peer Boat Rental Policy provides up to $300,000 in liability coverage, which is comparable to most recreational policies. "With recreational policies, the majority of people carry a $300,000 limit," said Pellerin." However, depending on your risk tolerance, you may want to buy supplemental insurance.
Pellerin suggests that high-net-worth owners may want to ask how much liability coverage the P2P policy is providing and then check with their homeowners or umbrella insurance to see if there are any additional limits available.
Is my boat safe, and am I meeting regulatory requirements?
"It's the owner's responsibility to make sure that the boat is equipped with all legally required safety equipment, everything is operational, and the boat is seaworthy," said Pellerin. "They should be doing a quick safety check and walkthrough with the renter."
Questions A Boat Renter Should Ask
Just because you don't own a boat, doesn't mean you're not potentially liable. "I think with any insurance the consumer should always look to what's excluded," said Pellerin. Here are the questions to ask:
What policy will be in effect over the rental period?
Be sure that you understand whose insurance policy will be in effect over the course of the rental. Does the platform provide the insurance coverage, or does the boat owner? Either way, ask for a copy of the policy and make sure it allows for rentals.
"For the Boatsetter/BoatUS P2P policy, we provide a section with actions to take and how a loss is paid," said Pellerin. "Our policy breaks down terms for someone who may not be insurance savvy so he or she can understand what limitations are included in the policy." If it's not a custom policy designed for P2P rentals or charter, neither party may be covered during a rental, he added.
What happens if the boat is damaged, and who pays the deductible?
"You really want to know the process," said Pellerin. "So if you go out and hit a log with the boat and damage the outdrive, how's that going to be handled? What are your out-of-pocket expenses going to be?" In most instances, P2P platforms collect a deposit up front that would serve as the deductible in case of a loss.
What are the steps for getting back to the dock in case of failure?
Pellerin says renters should always ask, "What do I do, who do I call, and how do I get back?" Confirm with the owner what steps you should take in case of mechanical failure. "Boatsetter provides TowBoatUS on-the-water towing service. So, should something happen, there would not be an out-of-pocket expense to get the boat back to the dock." Renters simply need to call the TowBoatUS dispatch center (800-391- 4869) or local TowBoatUS port to request on-water emergency service, or use the BoatUS App to request a tow.
Who is covered?
In some cases, you'll be required to name designated operators. "Our policy covers the renter and it covers any permissive operators," said Pellerin. "So if Scott and I go out and I'm the listed renter, but I need to go down below to change into my swimsuit, I might hand the helm over to Scott. As a permissive operator he would be covered. But that may not be the case with all companies, so that's something renters should check and ask: Is anybody who is provided the opportunity to run the boat covered?"
Where can I go?
"Make sure you understand where you can take the boat," said Pellerin. "With Boatsetter you can go up to 12 miles from the coast, and you must stay in U.S. waters. So if you're in Southern California, you've got to pay attention and make sure you're not getting into Mexican waters or going to Catalina." Use a GPS so you'll know where you are at all times. You may not be covered if you stray too far.
Are there special circumstances where I might not be covered?
The BoatUS Peer-to-Peer Boat Rental Policy doesn't cover damage in a named tropical storm. In Florida, if you own the boat, the P2P policy is cancelled as soon as a storm is named.
The policies also don't cover navigating at night, racing (including sailboat racing), and commercial uses like towing or nonrecreational fishing.
By asking a few questions and understanding your insurance policy you can enjoy P2P boating with peace of mind. "I think P2P boating is great," says Pellerin. "It certainly lends itself to the needs of up-and-coming generations and the time constraints of young families. They get the bug to go boating and don't have to worry about the ownership aspect."