What These Policy Types Actually Mean
Agreed Value
Value locked in at policy inception
How it works:
When you purchase the policy, you and your insurer agree on your yacht's value (usually based on a recent survey or appraisal). This value is stated in your policy declarations.
In a total loss:
You receive the agreed value amount, minus your deductible. No depreciation calculation. No negotiation.
Cost:
Higher premiums (typically 10-25% more than ACV policies), but you're paying for certainty.
Actual Cash Value (ACV)
Market value at time of loss
How it works:
Your policy covers your yacht's current market value, which is determined at the time of loss. This accounts for age, condition, depreciation, and market conditions.
In a total loss:
The insurer evaluates comparable yacht sales, applies depreciation, and pays what your yacht was "actually worth" when it was lost.
Cost:
Lower premiums than Agreed Value, but you bear the depreciation risk.
Side-by-Side Comparison
| Feature | Agreed Value | Actual Cash Value (ACV) |
|---|---|---|
| How value is determined | Agreed upon when policy is written, based on survey/appraisal | Calculated at time of loss based on market comparables |
| Depreciation applied? | No | Yes - can reduce payout 15-30%+ |
| Total loss payout certainty | 100% certain (stated in policy) | Unknown until claim is settled |
| Premium cost | Higher (10-25% more than ACV) | Lower |
| Required by lenders? | Usually required | Rarely accepted by lenders |
| Partial loss claims | Repair cost paid (minus deductible) | Repair cost paid, but depreciation may apply to replaced parts |
| Best for | Financed yachts, newer vessels, owners who want certainty | Older vessels, owners comfortable with market risk |
| Renewal considerations | Value can be adjusted up or down at renewal based on new survey | Coverage limit may decrease over time as yacht ages |
Real-World Examples: What You Actually Get Paid
Example 1: Total Loss - Hurricane Sinks Your Yacht
Scenario:
- 2019 Sunseeker 68 Sport Yacht
- Purchase price: $2,100,000 (new in 2019)
- Current year: 2026 (yacht is 7 years old)
- Recent upgrades: $80,000 in new electronics and interior refresh
- Hurricane causes sinking - declared total loss by surveyor
- Deductible: $5,000
Agreed Value Policy
Check issued within 30-45 days after total loss declaration. No negotiation needed.
Actual Cash Value Policy
Settlement delayed 60-90 days during valuation dispute. Your $80K in upgrades not fully recognized.
The Difference:
Agreed Value pays $270,000 more than ACV in this total loss scenario. That's 19.6% more money in your pocket.
Even if the Agreed Value policy cost $3,500/year more in premiums over 7 years ($24,500 total), you're still ahead by $245,500.
Example 2: Partial Loss - Grounding Damage
Scenario:
- 2021 Princess 60 Motor Yacht
- Grounding incident damages hull, running gear, and one shaft
- Survey determines: NOT a total loss (repairable)
- Repair estimate: $95,000
- Deductible: $2,500
Agreed Value Policy
Full replacement cost for all damaged parts. No depreciation on new shaft or hull repairs.
Actual Cash Value Policy
You pay depreciation on replaced parts. Out-of-pocket: $21,500 instead of $2,500.
Important Note on Partial Losses:
How ACV applies to partial losses varies by policy. Some ACV policies cover full repair costs but depreciate your total insured amount over time. Others apply depreciation to individual replaced parts. Always read your policy's "Basis of Recovery" or "Valuation" clause.
When ACV Surprises Owners (And Not in a Good Way)
Many yacht owners don't realize they have an ACV policy until they file a claim. Here are the most common scenarios where ACV creates unexpected problems:
1. You Still Owe More Than the Payout
Your yacht is totaled, but you still have $1,200,000 on your loan. Your ACV policy pays $1,050,000. You're personally responsible for the $150,000 gap, plus you no longer have a yacht.
This is why most lenders require Agreed Value policies with coverage at or above the loan amount.
2. You Made Significant Upgrades That Aren't Recognized
You spent $120,000 on new engines, electronics, and interior upgrades last year. In a total loss, the ACV adjuster says "comparable yachts without those upgrades sell for X" and only credits you $40,000 of your investment.
With Agreed Value, you can include recent upgrades in your agreed amount (with documentation/receipts).
3. The Market Has Softened Since You Bought
You bought your yacht in 2021 when the market was hot for $900,000. In 2026, similar yachts are selling for $650,000 due to market conditions. Your ACV payout reflects the current depressed market, not what you paid.
Agreed Value protects you from market fluctuations. The value is locked in at policy inception.
4. Your Yacht Is a Unique or Low-Production Model
You own a custom-built expedition yacht or a rare model with only 12 built. When determining ACV, the adjuster struggles to find comparables and lowballs the valuation because "there's no established market."
Unique yachts should always be insured on an Agreed Value basis using a qualified marine surveyor's appraisal.
5. The Claims Process Becomes a Fight
After a total loss, you and the insurer disagree on the ACV calculation. They say $780,000. You say $950,000. You hire your own appraiser. The settlement drags out for 9 months while you're making loan payments on a sunken yacht.
Agreed Value eliminates this fight. The value is stated in black and white on page one of your policy.
Bottom Line:
ACV policies shift the risk of depreciation and market fluctuations onto you. In exchange, you save 10-25% on premiums. For most yacht owners, especially those with financed vessels or yachts under 15 years old, Agreed Value is worth the extra cost.
Which Policy Type Should You Choose?
Choose Agreed Value If:
- You have a loan/mortgage on your yacht
- Your yacht is less than 15 years old
- You want certainty about payout in a total loss
- You've made significant upgrades or customizations
- Your yacht is a unique, rare, or custom-built model
- You want to avoid claims disputes over valuation
- You operate in high-risk areas (Florida, Caribbean hurricane zones)
Consider ACV If:
- Your yacht is fully paid off (no loan)
- Your yacht is 20+ years old and depreciation has mostly occurred
- You're comfortable with uncertainty in a total loss scenario
- You prioritize lower premiums over payout certainty
- You have cash reserves to cover a potential valuation gap
- Your yacht is a common production model with clear market comparables
Industry Recommendation:
Most yacht brokers and insurance professionals recommend Agreed Value policies for yachts under $2,000,000 in value that are less than 20 years old. The premium difference is typically small compared to the potential payout gap in a claim.
For vintage or classic yachts, or vessels over 30 years old, discuss both options with your broker. Some older vessels are better suited to ACV policies where the depreciation has mostly occurred.
Frequently Asked Questions
Can I switch from ACV to Agreed Value mid-policy?
Usually not mid-term, but you can change at renewal. You'll likely need a current marine survey or appraisal to establish the agreed value. Some insurers allow mid-term changes if you're refinancing or have a triggering event, but expect to pay the premium difference plus an administrative fee.
How is the agreed value determined when I buy a policy?
Typically based on a recent marine survey (within 2-5 years depending on yacht age and value), a professional appraisal, or purchase documentation if recently acquired. The insurer reviews the documentation and either accepts your proposed value or negotiates. Once agreed, it's stated in your policy declarations.
Does my agreed value stay the same every year?
No. At each policy renewal, the agreed value can be adjusted up or down based on a new survey, market conditions, or your yacht's condition. You and your insurer must re-agree on the value annually. If your yacht has appreciated (rare vintage models, for example), you can increase the agreed value. If it's depreciated, the insurer may reduce it.
What happens if I over-insure on an Agreed Value policy?
Insurers generally won't allow you to over-insure beyond fair market value plus a small margin (typically 10-15%). They'll require a survey to verify your proposed value. Deliberately over-insuring can be considered insurance fraud. If a total loss occurs and the insurer proves over-insurance, they may reduce the payout to actual market value.
Do I still need a survey if I have an ACV policy?
Possibly. Many insurers still require a recent survey for underwriting purposes, especially for yachts over a certain age or value, even on ACV policies. The survey helps the insurer assess condition and risk, even though the payout won't be based on the surveyed value. Always check your insurer's requirements.
Can I have Agreed Value on hull coverage and ACV on something else?
Yes. It's common to have Agreed Value for your hull and machinery coverage (the physical yacht) while having ACV or stated amounts for specific equipment like tenders, jet skis, or personal effects. Discuss with your broker how each component of your policy is valued.
How do total loss thresholds work with Agreed Value vs ACV?
A yacht is typically declared a total loss when repair costs exceed 75-80% of the insured value (the threshold varies by insurer). On an Agreed Value policy, this calculation uses the agreed amount. On an ACV policy, it uses the calculated actual cash value at time of loss. This means an ACV yacht might be repaired in scenarios where an Agreed Value yacht would be totaled, or vice versa.
What's the typical premium difference between Agreed Value and ACV?
Agreed Value policies typically cost 10-25% more in annual premiums than ACV policies, all else being equal. For example, if an ACV policy costs $8,000/year, an Agreed Value policy might cost $9,200-$10,000/year. The exact difference depends on your yacht's age, value, and insurer. Given the potential payout difference in a total loss, most owners find this premium increase worthwhile.
Does charter use affect Agreed Value vs ACV?
Policy basis (Agreed Value vs ACV) is separate from use (private vs charter). However, charter policies are almost always written on an Agreed Value basis because charter yachts depreciate faster and face higher risk. If you're considering chartering your yacht, expect to need an Agreed Value policy.
How This Fits Into Your Overall Yacht Insurance
The Agreed Value vs ACV decision is part of your Hull and Machinery (H&M) coverage, which protects the physical yacht itself. Your complete yacht insurance package typically includes:
Hull & Machinery Coverage
Physical damage to your yacht - this is where Agreed Value vs ACV applies.
Learn more about H&M coverage →Protection & Indemnity (P&I)
Liability for injury and damage to others. ACV vs Agreed Value doesn't apply here.
Learn more about P&I coverage →Return to our main Yacht Insurance Guide for a complete overview of coverage types, exclusions, and what to ask your broker.