Agreed Value vs Market Value Explained

When insuring your yacht, you’ll often see the terms “agreed value” and “market value.” These refer to two different ways your insurance company calculates how much they’ll pay if your boat is damaged or destroyed. With agreed value, you and your insurer set a specific value for your boat at the time you buy the policy. With market value, the payout is based on what your boat is worth at the time of the claim. This guide explains the difference, how each affects your coverage, and which might be better for you — with real examples and numbers.

Agreed Value vs Market Value: What’s the Difference?

Agreed Value

With agreed value, you and your insurer agree on a specific value for your boat when you purchase the policy. This value is based on your boat’s condition, age, and other factors. It doesn’t change over time, even if the boat depreciates or becomes more valuable. If your boat is totaled, you’ll get the full agreed value, minus your deductible.

Market Value

With market value, the payout is based on the current market price of your boat at the time of the claim. This means the amount you get can be lower if your boat has depreciated. For example, if you bought a $1 million boat and it’s now worth $700,000, that’s what you’ll get if it’s totaled — again, minus your deductible.

Why Agreed Value Might Be Better for You

Guaranteed Payout

Agreed value gives you peace of mind because you know exactly how much you’ll get if your boat is damaged or destroyed. This is especially important for high-value or classic yachts, which can be hard to value accurately at the time of a claim.

More Coverage for Classic or Rare Boats

Classic or rare yachts can be difficult to value using market value because there may not be many comparable sales. Agreed value ensures you’re covered for the full value you and your insurer agreed on, even if the market doesn’t reflect that.

Higher Premiums

Agreed value policies usually cost more than market value policies because you’re paying for the guaranteed payout. If your boat is new and depreciates quickly, you may end up paying more than necessary for coverage that’s lower in value over time.

Market Value: When It Makes Sense

Lower Premiums

If your boat is new and likely to depreciate quickly, a market value policy can be more cost-effective. You’ll pay less in premiums, and the payout will reflect the current value of your boat at the time of the claim.

Simple and Transparent

Market value is straightforward — the payout is based on what your boat is worth today. This can be easier to understand and manage, especially if you’re not sure how much your boat is worth in the long term.

Less Coverage for Older or Unique Boats

If your boat is older or has unique features, market value may not reflect its true worth. In a claim, you could end up with a payout that’s lower than what you expected, especially if the boat has sentimental or historical value.

Agreed Value vs Actual Cash Value (ACV)

What is Actual Cash Value?

Actual Cash Value (ACV) is similar to market value, but it also accounts for depreciation. The payout is based on the current market value minus depreciation. This means you’ll get even less than market value if your boat has aged or been used a lot.

Agreed Value vs ACV: Key Difference

With ACV, the payout is always less than the original purchase price because it accounts for depreciation. With agreed value, you get the full value you and your insurer agreed on, regardless of depreciation. This makes agreed value more attractive for older or classic boats.

How Deductibles Work with Agreed and Market Value

What is a Deductible?

A deductible is the amount you pay out of pocket before your insurance kicks in. For example, if you have a $10,000 deductible and your boat is damaged for $50,000, you’ll pay $10,000 and the insurance will cover the remaining $40,000.

How Deductibles Work with Agreed Value

With agreed value, your deductible is a fixed amount or a percentage of the agreed value. For example, if your boat is insured for $1 million with a 5% deductible, you’ll pay $50,000 out of pocket if it’s totaled.

How Deductibles Work with Market Value

With market value, your deductible is based on the current value of your boat. If your boat is now worth $700,000 and you have a 5% deductible, you’ll pay $35,000 out of pocket if it’s totaled.

Real-World Scenarios

Scenario 1: Agreed Value Policy with a Total Loss

You own a 10-year-old classic yacht and have an agreed value policy with a $1 million coverage limit and a 5% deductible ($50,000). Unfortunately, your boat is destroyed in a storm. Here’s how the claim works:

• Agreed value: $1,000,000
• Deductible: 5% of $1,000,000 = $50,000
• Insurance payout: $1,000,000 - $50,000 = $950,000

You receive $950,000 from your insurer and pay $50,000 out of pocket.

Scenario 2: Market Value Policy with a Total Loss

You own a 5-year-old yacht and have a market value policy. At the time of the claim, your boat is worth $700,000 and you have a 5% deductible. Your boat is totaled in a collision. Here’s how the claim works:

• Market value: $700,000
• Deductible: 5% of $700,000 = $35,000
• Insurance payout: $700,000 - $35,000 = $665,000

You receive $665,000 from your insurer and pay $35,000 out of pocket.

Scenario 3: Agreed Value vs Market Value in a Partial Loss

You have a $1 million boat insured under both agreed value and market value policies. You hit a submerged object and cause $200,000 in damage. Here’s how the claim works under each policy:

Policy Type	Deductible	Insurance Payout	Your Out-of-Pocket
Agreed Value	$50,000	$150,000	$50,000
Market Value	$35,000	$165,000	$35,000

With agreed value, you pay more out of pocket but get a lower payout. With market value, you pay less out of pocket and get a higher payout.

Other Important Concepts to Know

Navigation Limits

Navigation limits define where your boat can be insured. If you take your boat outside these limits and it’s damaged, your claim may be denied. For example, if your policy covers the U.S. East Coast and you have an accident in the Caribbean, you may not be covered.

Lay-Up Warranty

A lay-up warranty is a condition that must be met if you’re not using your boat for a period of time. For example, you may need to store it in a secure location and not use it for 60 days. If you don’t follow the lay-up warranty and your boat is damaged, your claim may be denied.

Salvage and Wreck Removal

If your boat is damaged and needs to be removed from the water, your insurance may cover the cost of salvage and wreck removal. This is especially important if your boat is in a remote location or has sunk.

General Average

General average is a maritime law principle that allows all shipowners to share the cost of a loss if it was made to save the ship or cargo. For example, if your boat is damaged and you jettison cargo to save the boat, the cost of the lost cargo may be shared among all shipowners in the same voyage.

Which Policy is Right for You?

Agreed Value is Best for:

• Classic or rare yachts
• Older boats with sentimental or historical value
• Boats that are hard to value using market data

Market Value is Best for:

• Newer boats that depreciate quickly
• Boats that are easy to value using market data
• Owners who want lower premiums

Final Takeaway

Choosing between agreed value and market value insurance depends on your boat’s value, age, and your personal preferences. Agreed value gives you a guaranteed payout, which is ideal for classic or rare yachts. Market value is more cost-effective for newer boats that depreciate quickly. Always read your policy carefully and understand the terms, including deductibles, navigation limits, and lay-up warranties. If you’re unsure, talk to your insurance agent — but remember, the best policy is the one that gives you the most coverage for the value of your boat.