Insurance companies will vary on how your motor is covered . Because of high probability of loss, damage to stern drives and outboards is one of the most difficult t topics of coverage faced by you and us as your insurance agent. Please refer to the partial loss section of your policy , review the items in the section that explain Replacement Cost and Depreciated Value.
Engines can be insured based on replacement cost, or depreciated value. If the boat insurance policy is written based on actual cash value, the engine will always be depreciated in the event of a loss. If the boat insurance policy is written based on agreed value, some boat insurance companies will replace new for old without a deduction for depreciation, but only until the engine becomes a certain age.
As the engine ages, the replacement cost may change to depreciated value. The age that a boat insurance company will apply depreciated value varies. Some insurance companies will apply depreciated value on all outboards or stern drives regardless of age. Other insurance companies change to depreciated value at age two, five, or seven. The age when depreciated value is applicable can be different for outboards, stern drives and inboards. There can also be differences between diesel and gasoline engines.
Here is an Example: An 8 year old stern drive boat with a $500 hull deductible hits a submerged object. The replacement cost to the stern drive is $9000.
Insurance company A provides replacement cost coverage until the stern drive is six years old. They will apply 60% depreciation (7.5% per year) to the $9000 replacement drive and then apply the $500 deductible. Insurance company A will pay $3700 ($9,000 less $4,800 depreciation, less $500 hull deductible).
Insurance company B provides replacement cost coverage until the stern drive is 10 years old. They will pay $8,500 ($9,000 less the $500 hull deductible).
Other factors to consider are for example, if the stern drive has to be replaced, most companies will apply a reduced depreciation if you agree to a remanufactured stern drive. This can save thousands of dollars in depreciation.