Just as real estate titles are subject to registration errors, pre-existing links, and other encumbrances, boat and boat titles can have hidden issues that can pose a liability to new boat owners. The best way for boat, yacht and boat buyers to protect themselves from these responsibilities is to purchase title insurance. The agencies that provide this type of insurance conduct thorough investigations of title histories to ensure that the title of the vessel is in “good opinion.” Boat title insurance also guarantees boat owners financial protection in the event of a lawsuit or other financial losses due to title complications.

Why do watercraft need title insurance?

There are several types of boat title problems that can occur. Boat buyers are generally unaware that any of these issues exist, until they are faced with a lawsuit for ownership or fees associated with previous links. Insurance agencies hire insurers and title attorneys to investigate the chain of title ownership to uncover these issues and resolve them before the sale occurs.

Common problems associated with yacht and boat titles include:

Fraud. Forged or fraudulent documents can occur at any time in the ownership history. Boat brokers or previous owners sometimes try to sell boats with false titles, defrauding both the boat mortgage lender and the new owner. In some rare cases, mortgages on the vessel’s ownership history can be revealed as fraudulent. Additionally, 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 precipitate multiple mortgages for which the boat owner can be held liable.

Property disputes. Even if a boat owner carries a valid Certificate of Documentation and a federal boat registration, they may still be subject to ownership disputes. These documents do not have the ultimate authority to determine ownership; only the underlying contract for the yacht or vessel can determine ownership. If the underlying contract for the vessel’s title is drawn up on fraudulent documents, the buyer’s property could be invalidated.

Mortgages or pre-existing ties. The new owner of a vessel is responsible for unpaid taxes, unresolved mortgages, and unpaid contract work associated with the vessel’s title, even if they were not known to them at the time of purchase.

Boat buyers can request an opinion on the title before finalizing the sale. While a good opinion provides some assurance in the face of disputes, opinions and summaries on the title of the boat may not always be reliable. Bad records, inadequate documentation, fraud, and human error can lead insurers to draft opinions on defective titles. The only way for a yacht or boat buyer to protect themselves against these complications is by purchasing boat title insurance.

How does boat title insurance protect me?

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