What Boat Dealers Need To Know About Test Rides, Demos, and Inventory Liability

Test rides and on-water demonstrations are essential sales tools for boat dealers. They allow customers to experience performance, handling, and features before making a purchase decision. 

Of course, things don’t always go as planned. If a customer were to steer a boat onto dry land, the financial and liability risks could escalate quickly. You can see why boat dealer insurance is a critical topic that every dealer and insurance agent should address ahead of the selling season.

As demand increases (and it generally does heading into the spring and summer, when it’s often a good time to buy a boat), agents who understand how demos and inventory exposure affect risk will be better positioned to identify gaps before losses occur.

Why Test Rides and Demos Create Unique Liability Exposure

Test rides and demos shift control of the vessel, often placing customers at the helm. Even with waivers in place, dealers can still face liability if an accident results in bodily injury or property damage. Assumption-of-risk arguments do not eliminate a dealer’s exposure, particularly when a customer faults them for subpar instruction, supervision, or vessel condition.

On-water accidents during demonstrations can involve multiple parties, including other boaters, docks, or marina infrastructure. Claims may extend beyond the demo vessel itself, increasing severity and complexity.

Employee involvement adds another layer of exposure. Sales staff or technicians may be on board during demonstrations, raising questions about employee injury, supervision, and operational responsibility in the event of an incident.

Inventory Risks Agents Should Not Overlook

Dealer inventory exposes the dealer well beyond the showroom. Boats may be stored on land, in the water, or at off-site marinas and storage facilities, and each location has the potential for different risk factors tied to weather, security, and access.

Vessels in transit face additional exposure, whether they are being delivered to customers, moved between locations, or transported for shows and promotions. In these instances, too, weather events, vandalism, theft, and accidental damage can all result in significant losses if values are not accurately reported or coverage is limited.

Congested marinas and docks also increase the likelihood of incidental damage.

How Boat Dealer Insurance Addresses These Gaps

Specialized boat dealer insurance is designed to address any liability and property exposure that falls in that gray area where you own the boat, but it’s not necessarily being captained by your company.

Inventory coverage typically addresses dealer-owned watercraft, whether they are stored, displayed, or operated for demonstration purposes. Accurate valuation and clear understanding of where and how boats are used are essential to avoiding underinsurance.

Boat dealers should have coverage for used boat sales as well.

Unlike standard commercial policies, marine-focused dealer programs account for on-water operations, seasonal fluctuations, and customer interaction.

Prepare Before the Selling Season Begins

Test rides, demos, and inventory exposure are part of everyday boat dealer operations, but they also represent some of the most common sources of liability and loss. Waiting until peak season begins can limit your client’s options and increase the likelihood of coverage gaps.

But if something goes wrong and there’s a claim filed, you may wind up saving the day, thanks to your advice. Proactive reviews allow agents to address a boat dealership’s exposures early and make sure their coverage aligns with their day-to-day operations. Partnering with a marine-focused specialist such as Merrimac Marine Insurance gives agents access to programs designed specifically for dealer risk.

About Merrimac Marine Insurance

At Merrimac Marine, we are dedicated to providing insurance for the marine industry to protect your clients’ business and assets. For more information about our products and programs, contact our specialists today at (800) 681-1998.