Few terms in the boating lexicon strike more fear and dread than "salvage." After all, most boaters have heard the dreaded stories of owners who called for a simple tow after the engine stopped or they ran soft aground, only to find out after the work was done that they owed the tower thousands of dollars because the incident was deemed a salvage. Worse yet, the salvor slapped a lien against the boat to ensure payment, or even took possession until payment was received.

While some of these stories no doubt are apocryphal, they do hold shreds of truth that serve as warnings we all should heed before going out on the water.

There are fundamental differences between what constitutes a tow and a salvage operation, and knowing them can save you hundreds, if not thousands, of dollars.

If you run aground and just need a simple pull off, that's a tow.ASSESSING THE THREAT

The legal definitions for tow and salvage come from admiralty law. When it comes to understanding the difference, the experts say the word to remember is "peril."

"Per the old letter of the law regarding on-the-water assistance, all forms of assistance were considered salvage," says Adam Wheeler, assistant vice president of towing services for BoatU.S. "In today's terms, it's gotten to a form now where (salvage) involves peril to the boat that is in distress."

That's not as easy to determine as you might think. Even in seemingly harmless situations, an element of peril can exist that transforms a simple marine-assistance operation into salvage.

For example, peril can be created by the makeup of the ground the boat is sitting on and/or whatever else is below the waterline, even if the boat appears to be in no immediate danger of sinking, and the occupants are basically safe. It also pertains as much to the vessel lending assistance as to your boat; if that vessel can be put at risk, you've got a salvage situation.

In sum, "If the boat is taking on water, if it's sunk, if there was a collision, if the weather is bad, if it is disabled, those all can be situations where you cross from towing into salvage," Wheeler says.

THE TOWING GAME

By comparison, in simple terms, towing involves any non-emergency situation where the boat merely is being taken back to shore, or is pulled quickly from a sandy bottom where there's no damage and the weather is clear.

"Towing is, basically, you're out on the water, the weather is decent, you've run out of gas, or you've had a mechanical breakdown and you need a tow to get back in," Wheeler says. "Or you ground yourself on a nice, sandy bottom, the tower comes out, throws you a line, pulls you off, and you're ungrounded. That's a soft ungrounding, and that is covered under towing programs, such as the BoatU.S. towing program."

The Coast Guard can call for assistance on your behalf and stand by your boat until help arrives.Capt. Joe Frohnhoefer, the chief executive of Sea Tow International, offers a more succinct definition of towing: "Towage is basically the transportation of goods or a vessel from one port to another port for the means of getting it there," he says. "If [the vessel] is not under propulsion"¦and it's going from a dock to another dock, that is towage."

However, situations where there is potential damage to the boat or potential environmental damage may actually be salvage operations. "The tricky part is, to a novice boater, the situation may not seem perilous, but it may be," Wheeler says.

Frohnhoefer agrees, painting the following picture to help further explain the difference. "If a boat is out in the ocean and it's flat calm, and [the boater] breaks down, is he in peril?" he asks. "Maybe, on a scale of 1 to 10, but we'll say one. If he's out in the ocean, he's broken down, he has a rope around his prop, and we have to tow him back in, we're going to call that marine assistance, but technically, it's salvage."

However, if the boat tore a strut and is taking on water, the danger increases. "As that peril increases, the salvage and the risk increases as well," Frohnhoefer says, adding that the associated costs also may increase.

PROTECT YOURSELF

Before you head out on the water, review your insurance policy. What are you covered for, and for how much? Boat-insurance policies do cover salvage costs, but they may include deductibles and exclusions. BoatU.S. cautions against deductibles and recommends you speak with your agent. You should also make sure the policy states provisions for salvage up to your boat's full value, instead of just a percentage of its value.

If you hold membership in a towing service, check that policy, too. Services such as Sea Tow International and TowBoat U.S. typically cover basic assistance, but not salvage operations.

If your boat is sinking, then it's a salvage situation, not a tow.If you do run into trouble while out on the water and radio for a tow, Frohnhoefer, Wheeler and others advise that you ask the provider before it lends a hand whether it considers the situation salvage. If the operation is indeed salvage, they also recommend asking the provider, also called a salvor, for the terms and potential costs. Get these in writing to ensure you're being charged fairly.

How? Frohnhoefer advises having a copy of the Open Form Salvage Agreement, or MARSALV, on your boat. Created by The Society of Maritime Arbitrators more than a decade ago, it's a one-page document that avoids legal jargon and allows the parties to elect options such as a fixed fee or a per-diem or hourly rate. In addition, the MARSALV agreement is environmentally sensitive, allowing salvors to receive compensation for actions they take to minimize damage to the environment. You can download the form here.

"I suggest to everybody that they sign an arbitration form of some type," Frohnhoefer says. "That way you know you're not going to court, and your case will be heard by a panel or an arbitrator who is familiar with commercial salvage or recreational-boat salvage. Chances are it will be settled very easily."

If you're a member of BoatU.S., you can ask if the salvor will comply with the BoatU.S. yacht-salvage contract, available here. It also spells out how costs will be charged and assures any claim can go to binding arbitration if negotiation fails.

Regardless of which contract you decide to use, you should always provide a copy of the signed agreement and any bills to your insurance agent as quickly as possible.

SALVAGE COSTS

The experts say three conditions must be met before a salvor can charge for services. The vessel must be in peril; the salvor must act voluntarily and not be under any pre-existing contract or duty to provide assistance (for that reason, the U.S. Coast Guard or a local fire department cannot charge for salvage assistance); and the salvage operation must be successful in saving all or some of the property at risk. If the vessel sinks and can't be raised during salvage, then the salvor is not entitled to compensation.

The fees charged are based, in part, on the salvaged value of the boat, which is the boat's value just prior to rescue minus damage-repair costs; the degree of the salvor's success; the nature and degree of peril; the skill and efforts of the salvors in minimizing environmental damage; and the salvor's time, as well as expenses and losses incurred.

Following a successful salvage operation, the salvor may immediately will place a lien on the boat to ensure payment, which is a standard procedure. The lien typically is removed once payment is made.

Trying to determine whether a situation calls for salvage or a tow is confusing. That's why it's vital to review your insurance and boating-membership documentation thoroughly now, before you run into trouble out on the water. Hopefully you won't ever have to place a call for assistance, but if you do, you'll be educated on how to proceed to best protect your boat – and prevent an expensive mistake.