The Core Difference
When your yacht is declared a total loss, how much does your insurance company pay you? The answer depends entirely on whether your policy uses agreed value or actual cash value (ACV).
Bottom Line:
With agreed value, you and your insurer agree upfront on your yacht's worth. With ACV, they pay the depreciated value at the time of loss—which can be 20-40% less than what you paid or owe.
Side-by-Side Comparison
| Factor | Agreed Value | Actual Cash Value (ACV) |
|---|---|---|
| How it works | You and insurer agree on value when policy starts | Insurer determines depreciated value at time of loss |
| Total loss payout | ✓ Full agreed amount (minus deductible) | ✗ Market value minus depreciation |
| Predictability | ✓ You know exactly what you'll receive | ✗ Payout uncertain until claim |
| Depreciation | ✓ None - value locked in | ✗ Yes - reduces payout every year |
| Premium cost | ✗ Higher (~10-20% more) | ✓ Lower |
| Financed yachts | ✓ Lender usually requires this | ✗ Often insufficient to cover loan |
Real-World Example: Total Loss After 3 Years
You purchased a yacht 3 years ago for $500,000. A hurricane sinks it. Here's what each policy type pays:
Agreed Value Policy
$500,000 agreed value set 3 years ago
✓ Enough to buy equivalent replacement yacht
Actual Cash Value Policy
Market value depreciated 30% over 3 years
✗ $142,500 less than agreed value policy
Financing Impact:
If you still owe $400,000 on your yacht loan, the ACV policy leaves you $67,500 short ($400,000 loan - $332,500 payout). You're responsible for paying the lender the difference—and you no longer have a yacht.
Which Should You Choose?
Choose Agreed Value If:
- You have a loan: Nearly all marine lenders require agreed value coverage to protect their collateral
- Your yacht is newer (less than 10 years old): Depreciation hasn't significantly reduced value yet
- You want certainty: You'll know exactly what you'll receive in a total loss
- You've made significant upgrades: Electronics, rigging, engines—agreed value captures these improvements
- You couldn't afford to absorb a loss: The premium difference (10-20%) is worth the peace of mind
Consider ACV If:
- Your yacht is older (15+ years): Depreciation has already occurred; less difference between ACV and market value
- It's fully paid off: No lender requirement for agreed value
- You have cash reserves: You can handle a lower payout and aren't relying on insurance to replace the yacht
- Premium savings matter more: You're prioritizing lower annual costs
Industry Standard:
Most yacht owners choose agreed value. According to marine insurance brokers, approximately 85% of yacht policies under $2 million are written on an agreed value basis, especially for yachts less than 20 years old.
How Is Agreed Value Determined?
When you apply for agreed value coverage, the insurer evaluates:
- Purchase price: What you paid (if recent)
- Marine survey: A professional surveyor's appraisal (often required for yachts over $100K)
- Comparable sales: Similar yachts sold recently
- Condition and upgrades: Maintenance records, recent refits, equipment additions
- Year, make, model: Standard valuation guides (BUC, NADA)
The insurer may adjust your requested value up or down based on these factors. Once agreed upon, this value is locked in for the policy term (usually 1 year).
Annual Review:
At each renewal, you can adjust the agreed value. If you've added $50K in new electronics or engines, increase the value. If the market has declined, you might reduce it to lower your premium.
What About Partial Losses?
For partial damage (repairable claims), both agreed value and ACV policies work the same way:
- Insurance pays actual repair costs minus your deductible
- You don't receive a depreciated payout for parts or labor
- Example: $30,000 in storm damage is covered for $30,000 (minus deductible), regardless of policy type
The difference only matters in total loss scenarios, where the yacht is deemed unrepairable or repair costs exceed ~75-80% of the insured value.
Frequently Asked Questions
Can I switch from ACV to agreed value mid-year?
Typically, no. You'll need to wait until your policy renewal. However, if you recently purchased the yacht or completed major upgrades, some insurers allow mid-term endorsements. Contact your broker to discuss options.
What if I disagree with the insurer's agreed value offer?
Provide additional documentation: a recent marine survey, comparable sales listings, or upgrade receipts. If the insurer won't budge and you believe your yacht is worth more, you can seek coverage from a different carrier or accept a lower agreed value to reduce premium.
Do I get the full agreed value even if the yacht wasn't worth that much?
Yes—that's the point of agreed value. If you and the insurer agreed on $500,000, but the yacht's true market value was only $450,000, you still receive $500,000 (minus deductible) in a total loss. However, insurers verify value at policy inception to prevent over-insuring.
How much more expensive is agreed value coverage?
Premiums for agreed value policies are typically 10-20% higher than equivalent ACV policies. For a yacht with a $5,000 annual premium, you might pay $5,500-$6,000 for agreed value. Most yacht owners consider this a worthwhile investment.
Can I over-insure my yacht with agreed value?
No. Insurers cap agreed value at fair market value based on surveys and comparables. You can't insure a $300,000 yacht for $500,000 just to profit from a total loss. This is considered insurance fraud and voids your policy.