Property and Casualty Insurance Practice Exam

What does the Personal Yacht Policy primarily cover?

1. Environmental damage to the yacht

2. Liability for accidents involving the yacht

3. Property and liability coverages for large pleasure boats

4. The operational costs of maintaining the yacht

The correct answer is: Property and liability coverages for large pleasure boats

The Personal Yacht Policy is designed to provide comprehensive coverage specifically tailored for large pleasure boats, including yachts. This type of policy integrates both property and liability protections, which is essential for owners of sizable recreational vessels. Property coverage typically includes damages to the yacht itself, as well as its furnishings and equipment due to various perils like collision, vandalism, or theft. Liability coverage protects the yacht owner against claims arising from injuries or damages caused to third parties while operating the vessel, ensuring that the owner is safeguarded from legal and financial repercussions. While environmental damage, liability for accidents, and operational costs are important considerations for yacht owners, they do not fully capture the comprehensive nature of what a Personal Yacht Policy covers. Specifically, environmental damage may not always be included under typical yacht insurance policies; liability for accidents is a part but is not the whole picture; and operational costs, such as maintenance and repairs, are typically not covered under the policy but rather fall under the owner's responsibilities. Overall, the policy is distinct in its ability to provide thorough coverage specifically suited for large pleasure boats, making it a vital tool for yacht owners.