One of the conundrums we had hoped to solve while visiting vendor booths was the issue of insurance. Of course, I knew we needed insurance on our boat, and our project, very much like a home, I assumed. So I confidently approached the first marine insurance vendor's booth. Using my refined explanation of what we are doing (see above) so as to be taken seriously, I approached the veteran insurance salesman who looked bored. I figured he would be able to educate me a bit. I asked about insurance costs. " No problem, what kind of vessel is it?" he asked. " Well, it will be a Fusion 40 Sail Cat, but right now it's in two shipping containers, coming from Australia," I replied. This response brought double frowns. First, the Fusion 40 is not a well known manufacturer like, for instance, Sea Ray or Lagoon, so we'd given him no frame of reference. Next , if it was in two shipping containers, it clearly wasn't a boat! He kindly shook his head and replied, "No, come back when it floats. Then we can sell you a policy." I walked away, deep in thought.
The salesman's answer seemed to make some sense, but I felt it could not be the entire answer. There was the time the containers would spend en route to the yard in Sarasota to consider, and also the two plus years it would spend being constructed at the yard. Kim, the yard owner had already told me that their insurance would not cover the boat itself, and that we needed a separate policy.
After several more inquiries, and many more frowns, the Progressive insurance salesman was finally able to explain the answer: we needed a Builder's Risk insurance policy! This would start out covering the initial investment in the kit, and would increase in value over time, as the kit slowly became a vessel. Then, when it was launched, and under its own power, we could have it surveyed, and valued, and then purchase a regular marine insurance policy. Finally, this made sense! The salesman explained that his company does not write this insurance, but he took my contact information, and promised to have an associate contact me, and sure enough, two hours later, I had an application in my email. So, Second Lesson Learned. Thanks, Flo!
In discussing this information, and reviewing the insurance application, however, we hit another snag: how would we know what the boat was worth at any given time, in order to make the adjustments in the policy? And this question tied in with another murky area: boat registration. Every vessel is registered in a "home port", and then as it travels to other waters, needs to obtain cruising permits to stay for a specified length of time. We had already contacted the Department of Motor Vehicles, which handles vessel registration in Florida, and discussed our plans with a very enthusiastic government worker. But, he reiterated, just like the insurance vendor, that until our boat was a BOAT, it could not be registered. And oh, by the way, at that time you will need to pay sales tax on the boat. His definition of a boat was the same: it needed to be able to be launched and operate under it's own power.
OK, that's cool. But wait...Sales Tax??? Sure, when you buy a car, or other products, you pay sales tax. But this sounded like double dipping: if we paid sales tax on most of components as the boat was built, why did we then have to pay sales tax again on the value of the finished product? We next called the State Tax Department, where we talked with another (very enthusiastic) government worker who explained that we needed to keep very careful track of the cost of what was used to build the boat, along with any tax paid on those purchases. Then, when the time came to declare XYZZY a real boat, we would be able to complete a form, back it up with documentation, and only pay the difference. In addition, in July of 2010, a law was passed that the maimum amount of tax on a boat (in Florida) was $18,000.00. Wow! They have either spent a lot of effort to train these state workers in people skills, or the folks that work for the State of Florida are just much nicer people than those who work in health care insurance-the folks I get to argue with every day in our business! But they were very helpful, and we felt the puzzle was finally coming together. Lesson Three Learned.
On the last day of the boat show, we revisited several booths, feeling confident that we had the answers to our questions. Stopping by a booth that advertised Vessel Registration, we thought we'd just get a bit more clarification on all that we'd learned. But no, the folks here had more wisdom to impart. Turns out that you can incorporate your vessel, and that as a corporation, it is treated very differently that when it is owned by individuals. Furthermore, Alice explained, you could incorporate outside of the US, like in the British Virgin Islands, or the Cayman Islands, and avoid the entire discussion of sales tax. But, I wondered, what happens when we want to sail in US waters? Simple, Alice explained, you purchased a cruising permit, and then you are allowed to stay in the US for a year, at which time, you had to leave, clear a foreign port, such as the Bahamas, and then return. How bad could that be, we wondered? Not really a hardship to have to spend time in the Bahamas once a year! This sounded really interesting, and so we have more topics to research. Lesson Four Learned: you're never done learning!