Boat and Vessel Title Insurance – Protecting Your Watercraft Investment

Written by Amine

Just as real estate titles are subject to record errors, preexisting liens and other encumbrances, ship and boat titles can have hidden problems that can create liability for new ship owners. The best way for buyers of ships, yachts and watercraft to protect themselves from these liabilities is to purchase title insurance. Agencies providing this type of insurance carry out thorough title history investigations to ensure the vessel’s title is in “good standing”. Ship title insurance also ensures financial protection to ship owners in the event of a lawsuit or other financial loss due to complications with the title.

Why Do Watercraft Vessels Need Title Insurance?

There are several types of problems that can occur on boat titles. Buyers of vessels are usually unaware that any of these problems exist – until they are slapped with an ownership lawsuit or fees associated with previous liens. Insurance agencies hire underwriters and title attorneys to investigate the chain of title ownership to uncover these problems – and resolve them – before the sale takes place.

Common problems associated with yacht and vessel titles include:

Fraud Forged or fraudulent documents can occur at any point in the ownership history. Shipbrokers or previous owners sometimes try to sell vessels under false titles, defrauding both the vessel’s mortgage lender and the new owner. In some rare cases, mortgages in the vessel’s ownership history may be revealed as fraudulent. Additionally, watercraft can be registered with both the US Coast Guard and the State, allowing vessels to carry more than one “valid” title. Multiple titles may precipitate multiple mortgages for which the shipowner may be held liable.

Ownership disputes. Even if a vessel owner has a valid Certificate of Documentation and Federal boat registration, he or she may still be subject to ownership 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 underlying contract of vessel title is drawn up on fraudulent documents, the buyer’s ownership may become void.

Prior mortgages or liens. The new owner of a watercraft is held liable for any unpaid taxes, unpaid mortgages and unpaid contract work associated with the title of a vessel, even if he or she was unaware of them at the time of the shopping.

Watercraft buyers can request a title opinion before finalizing the sale. While a good opinion provides some insurance against disputes, vessel title opinions and abstracts may not always be reliable. Incorrect records, improper documentation, fraud and human error can lead underwriters to draft defective title opinions. The only way for a yacht or boat buyer to protect himself from these complications is to purchase vessel title insurance.

How Does Boat Title Insurance Protect Me?

In addition to conducting a thorough investigation of the vessel’s ownership history before completing the sale, title insurance companies provide financial compensation in the event of a lawsuit. Vessel title insurance typically covers the cost of legal defense against attacks on the vessel’s title; in addition, the insurance provides compensation for any financial or asset losses caused by a defective title.

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