Just as property titles are subject to registration errors, pre-existing liens, and other encumbrances, boat and boat titles can have hidden issues that can pose a liability for new boat owners. The best way for boat, yacht and boat buyers to protect themselves from these liabilities is to purchase title insurance. Agencies that provide this type of insurance conduct thorough background investigations of the title to ensure that the vessel’s title is in “good standing.” Boat title insurance also ensures financial protection for boat owners in the event of a lawsuit or other financial loss due to title complications.
Why do watercraft boats need title insurance?
There are several types of issues that can occur in ship titles. Boat buyers are often unaware that any of these problems exist, until they are faced with an ownership claim or fees associated with prior liens. Insurance agencies hire title insurers and attorneys to investigate the chain of ownership of the title to uncover these problems, and resolve them, before the sale occurs.
Common issues associated with yacht and boat titles include:
Fraud. Forged or fraudulent documents can occur at any point in the ownership history. Boat brokers or previous owners sometimes try to sell boats under false titles, defrauding both the boat’s mortgage lender and the new owner. In some rare cases, mortgages on the boat’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 may be liable.
Property disputes. Even if a vessel owner has a valid Certificate of Documentation and federal vessel registration, they may still be subject to ownership disputes. These documents do not carry the ultimate authority to determine ownership; only the underlying yacht or vessel contract can determine ownership. If the underlying contract for the vessel’s title is drawn up on fraudulent documents, the buyer’s ownership could be voided.
Pre-existing mortgages or bonds. The new owner of a boat is responsible for any unpaid taxes, unsettled mortgages, and unpaid labor contract associated with the title of the boat, even if he or she was not aware of them at the time of purchase.
Boat buyers can request a title opinion before finalizing the sale. While a good opinion provides some security against disputes, opinions and summaries of vessel titles may not always be reliable. Erroneous records, inadequate documentation, fraud and human error can lead insurers to write faulty title opinions. The only way a yacht or boat buyer can protect themselves against these complications is to purchase boat title insurance.
How does boat title insurance protect me?
In addition to conducting a thorough investigation of the boat’s ownership history before the sale is completed, title insurance companies provide financial compensation in the event of a lawsuit. Boat title insurance generally covers the cost of legal defense against attacks on the title of the boat; In addition, the insurance will provide compensation for any financial or asset loss caused by a defective title.