Even when you’ve arranged liability coverage for injuries and property damage you cause to the public while renting boats or recreational vehicles, you don’t have liability coverage for damage to the rented item itself. (See the exclusion in your homeowner’s policy for property that is in your custody.)

Here’s an example of the problem for a boat rental that also applies when renting recreational vehicles of all types: You’re on vacation and you see a boat that you want to rent. If you’re like most people, you scribble your signature on a contract without reading it. (Who has time to read? You’re on vacation!) You pay a damage deposit, usually about $500, and you assume that if you damage the boat, you’ll just lose your deposit. Then you’re off, operating a boat that you may be unfamiliar with, on a body of water that you may also be unfamiliar with.

Your uninsured liability for damage to the boat itself occurs in two ways:

• Your legal liability for damage you actually cause to the boat when operating it yourself
• Your contractual liability in which you agreed to be responsible for anything that happens to the boat, even when the damage is not your fault

“Okay, but the worst that can happen is that I’m out the damage deposit,” you say. Not true, unless the damage is less than the damage deposit. The damage deposit is just a deposit. If the boat is destroyed in a tornado, or if you hit some submerged rocks causing an engine fire that burns the boat, you’re liable for the cost of the repairs or the cost to replace the boat.

Now, assume you’re sharing the rental with a friend. You’re both driving the boat, and you’re splitting the cost. But you signed the contract; he didn’t. Your friend drives recklessly and seriously damages the boat. Who does the rental agency go after? You – because you agreed to be responsible for any-thing that happens! Ouch!

How can you protect yourself? Read the contract before you sign it or have it faxed to your insurance agent. If the contract makes you responsible (most rental contracts do), there are two ways to protect yourself:

• Buy the optional insurance from the rental agency, but only if it covers all the damage you’re responsible for. Often, it does not.
• Rely on coverage in your umbrella policy. If it doesn’t cover damage to any boat you rent, find an umbrella policy that does. The good ones do.