Boat & Vessel Title Insurance – Protecting Your Watercraft Investment

Just as real estate titles are subject to registration errors, pre-existing liens and other encumbrances, vessel and boat titles can have hidden issues that can create liability for new ship owners. The best way for buyers of vessels, yachts and boats to protect themselves from these obligations is to purchase property insurance. Agencies offering this type of insurance conduct thorough title histories research to ensure that the ship’s title is in “good opinion”. Ship title insurance also provides financial protection for ship owners in the event of a lawsuit or other financial loss due to title complications.

Why do vessels need title insurance?

There can be different kinds of problems with boot titles. Ship buyers are usually unaware that any of these problems exist – until they are smashed with title to property or fees associated with previous liens. Insurance agencies hire insurers and title attorneys to investigate the title ownership chain to discover—and fix—these issues before the sale.

Common issues associated with yacht and vessel titles include:

fraud. Forged or fraudulent documents can appear at any point in the ownership history. Ship brokers or previous owners sometimes try to sell ships under false titles, defrauding both the mortgage lender and the new owner. In some rare cases, the mortgages in the ship’s ownership history may be revealed as fraudulent. In addition, vessels can be registered with both the US Coast Guard and the state, allowing vessels to carry more than one “valid” title. Multiple titles can lead to multiple mortgages for which the ship owner can be held responsible.

Property Disputes. Even though a vessel owner has valid proof of documentation and federal boat registration, he or she may still be the subject of property disputes. These documents do not have the ultimate authority to determine ownership; only the underlying contract of the yacht or vessel can determine ownership. If the vessel’s underlying contract is drawn up on fraudulent documents, the buyer’s ownership may be voided.

Existing mortgages or liens. The new owner of a vessel will be held responsible for all unpaid taxes, unpaid mortgages, and unpaid contract work associated with a vessel’s title, even if he or she was not aware of them at the time of purchase.

Personal watercraft buyers may request a title advice before closing the sale. While good opinion offers some assurance against disputes, vessel opinions and summaries are not always reliable. Incorrect data, incorrect documentation, fraud and human error can lead insurers to issue incorrect title advisories. The only way for the buyer of a yacht or boat to protect against these complications is by taking out shipowners insurance.

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How does boat title insurance protect me?

In addition to a thorough investigation of the ship’s ownership history before the sale is completed, property insurance companies offer financial compensation in the event of a lawsuit. Ship’s title insurance typically covers the costs of legal defense against attacks on the ship’s title; in addition, the insurance will provide compensation for financial or asset losses caused by a defective title.