As a boat owner, you may have noticed the increased cost of parts, fuel, maintenance, repairs, and even the entire vessel itself. This is likely due to inflation, an economic situation leading to higher living costs.
As inflation increases, so can the cost of boat insurance. This can significantly impact your premiums, coverage, and how much you must pay out of pocket. With that said, let’s take a closer look at the impact of inflation on insurance and what you can do to mitigate these concerns, so you can continue enjoying your time on the water.
What is Inflation?
Inflation measures the average increase in the prices of goods and services. This rise in prices goes hand-in-hand with declined consumer purchasing power. In other words, more inflation means our currency has less value and decreases the number of goods or services we can purchase. Rising prices can happen for various reasons, including higher production costs, increased demand, and changes in the money supply.
The Situation in Canada
The cost of living is rising in our country — we see it in the prices of groceries, gas, and other goods and services. Inflation in Canada impacts the boating industry in combination with other trends, like environmental changes and the pandemic. Here’s how:
- Since Canadians could not travel during the pandemic, they spent more of their vacation time on the water, which led to an increase in the total number of claims, especially by new boaters with a lack of experience.
- Climate change is leading to more extreme weather patterns and natural disasters. This trend impacts insurance because the increase in weather-related claims makes it more expensive for insurers. In an attempt to balance these expenses, they may raise their premiums.
- Inflation itself increases the cost of repair services and boat replacement parts. This leads to more expensive claims, which may raise insurance providers’ premiums.
These current trends influence pricing and coverage amounts on your policy. Let’s look at why this is the case in more detail.
What is the Impact of Inflation on My Insurance?
Inflation can affect your boat insurance policy in different ways. Mainly, it impacts your costs, like insurance premiums and out-of-pocket expenses. If you’re looking for a new boat insurance policy or currently have one, here are some ways inflation in Canada can impact your coverage:
1. Premiums for New Policies Can Get More Expensive
As prices increase over time, so will insurance products and services. For example, inflation may lead to rising costs of repairs and replacements, which means that boat insurance premiums may become more expensive when you take out a new policy. These higher rates ensure insurance companies can cover the higher volume and cost of claims.
2. Potential for Insufficient Coverage Limits
Most insurance companies have coverage limits. This limit is the maximum amount they’ll pay out in case of a claim. As inflation increases the cost of goods and services, it raises the price for repair and replacement — professional services cost more, and so do boat parts. This means that your current policy limits may not be sufficient enough to cover these costs in full, resulting in the potential of you paying more out of pocket.
3. Increased Difficulty Paying Deductibles
Your insurance deductible is the amount you’re responsible for paying before your insurance company covers the rest of a claim. In times with rising costs of living, these deductibles can become less affordable to shoulder out of pocket as your budget gets tighter. If you find yourself in this situation while submitting a claim, this might mean that you’ll have to wait to file it until you’ve gathered the money to pay your deductible.
How to Deal with the Impact of Inflation on Insurance
With increasing costs impacting your insurance, there are a few things you can do to mitigate this impact and save money. For example:
Find a Marine Insurance Brokerage
You can ensure you get the best boat insurance policies and prices by specifically seeking out brokerages that specialize in marine insurance. Speaking to these experts can give you peace of mind knowing that your coverage options are tailored to your needs by people who know the ins and outs of the industry.
Review Your Coverage Regularly
Regular reviews of your boat insurance coverage can ensure it still meets your needs and provides adequate protection for your vessel throughout the year. This is an opportunity to make adjustments and remove certain parts of your policy, if necessary.
Save for Emergencies
As mentioned above, inflation can lead to higher expenses paid out of pocket. For this reason, if you’re able to, build up a savings buffer to help you prepare for unexpected costs related to your insurance coverage.
Consider Inflation-Protected Policies
Some insurance companies offer inflation-protected policies which automatically adjust to changes in the cost of living. The purpose of these specialized policies is to ensure the value of your coverage does not erode over time because of increased prices.
Adjust Coverage Limits and Deductibles
If you have an existing policy, you can reduce the impact of inflation by adjusting your coverage limits and deductibles. For example, increasing your deductible can decrease your premiums, but keep in mind that you’ll have to pay more out-of-pocket if you have to make a claim.
Customizable Boat Coverage Options for You
At Portside Marine Insurance, we understand that inflation can significantly impact the type of protection you can afford. That’s why we offer customizable coverage options to help you mitigate the impact of the rising cost of living while still being able to enjoy your time on the water. If you’re concerned about how inflation might impact your existing or future policies, we’re here to help. Get a quote or contact us today to learn more about how we can make your boat insurance work for your needs.