How your motor-machinery is covered?
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.
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.
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. Also, depreciation is only applied to parts (real property). Depreciation is not applied to labor, storage charges and other non real property items.
Please check your boat insurance policy to see what is covered. Or if you are uncertain on coverages call your agent.