Agreed vs. Actual Value: What's the Difference?

Agreed value and actual cash value (ACV) are two ways to set the value of your boat for insurance purposes. With agreed value, you and your insurer agree on a specific value for your boat before the policy starts, and that value doesn’t change unless you update it. With ACV, the value is determined at the time of a claim based on the boat’s condition and market value. The key difference is that agreed value gives you more control and certainty, while ACV can result in lower payouts if your boat has depreciation or damage.

Agreed Value vs. Actual Cash Value: The Basics

What is Agreed Value?

Agreed value is a fixed amount you and your insurer agree on for your boat. This value is set when you buy the policy and doesn’t change unless you update it. It’s like setting a price tag on your boat before anything happens. If your boat is totaled, you’ll get the full agreed amount, minus your deductible.

What is Actual Cash Value (ACV)?

Actual cash value is the current market value of your boat at the time of a claim. It takes into account depreciation, wear and tear, and any damage the boat may have. This means the payout can be lower than what you paid for the boat or what it was worth when you bought the policy.

Why This Matters for Boat Owners

Depreciation and Damage

Boats, like cars, lose value over time. If you have ACV coverage, the payout after a total loss will reflect this depreciation. For example, a $100,000 boat might be worth only $70,000 after a few years. With agreed value, you get the full $100,000 if the boat is totaled, assuming that was the agreed amount.

Peace of Mind vs. Cost

Agreed value policies are more expensive than ACV policies because they offer more coverage. However, they give you more certainty. If your boat is damaged or destroyed, you won’t have to argue over its value. With ACV, you might end up with a lower payout, especially if the boat has been in an accident or has visible wear.

How Agreed Value and ACV Work in Claims

Scenario: Total Loss with Agreed Value

You own a 10-year-old $150,000 yacht. You have an agreed value policy with a $2,500 deductible. One day, a storm causes a total loss. Your insurer pays you the full agreed value of $150,000, minus your deductible. You receive $147,500.

Scenario: Total Loss with ACV

You own the same 10-year-old $150,000 yacht, but you have an ACV policy with the same $2,500 deductible. Due to depreciation and wear, the boat is now worth $90,000. After a total loss, the insurer pays you $90,000 minus your deductible. You receive $87,500. You end up with $60,000 less than with agreed value.

Scenario: Partial Damage with Both Policies

Your $100,000 boat is damaged in a collision. Repairs cost $20,000. With agreed value, you get the full $20,000, minus your deductible. With ACV, the insurer may only pay for repairs based on the boat’s current value. If the boat is worth $70,000, the insurer might only cover $14,000 in repairs, leaving you to pay the remaining $6,000.

Other Important Insurance Concepts to Know

Hull & Machinery Cover

Hull and machinery coverage is the main part of your boat insurance policy. It pays for damage to your boat’s structure and mechanical systems. Whether you choose agreed or ACV, this coverage determines how much of the repair cost is covered.

Deductible / Excess

Your deductible is the amount you pay out of pocket before your insurance kicks in. For example, if you have a $2,500 deductible and a $20,000 repair, you pay $2,500 and the insurer pays $17,500. Deductibles apply to both agreed value and ACV policies.

Salvage and Wreck Removal

If your boat is damaged beyond repair, the insurer may take it as salvage. This means they keep the wreck to sell for parts. With agreed value, you still get the full payout. With ACV, the payout may be reduced by the value of the salvage.

How to Choose Between Agreed Value and ACV

Consider Your Boat’s Value

If your boat is brand new or has high sentimental or market value, agreed value is usually the better choice. If your boat is older and has depreciated significantly, ACV may be more cost-effective.

Think About Your Budget

Agreed value policies are more expensive, but they offer more coverage. If you want to save money and are okay with a lower payout in a total loss, ACV may be right for you.

Review Your Policy Annually

Whether you choose agreed or ACV, it’s important to review your policy each year. Boat values change, and your needs may change too. If your boat is now worth less, you might consider switching to ACV to save money.

Agreed Value vs. ACV: A Comparison Table

Feature	Agreed Value	Actual Cash Value (ACV)
Value Set at	Policy start	Time of claim
Depreciation Considered	No	Yes
Typical Cost	Higher	Lower
Claim Payout	Full agreed amount minus deductible	Current market value minus deductible
Best For	High-value or new boats	Older or depreciated boats

Other Related Concepts to Know

Lay-Up Periods and Lay-Up Warranty

If you’re not using your boat for an extended period, you may need to declare a lay-up. Some policies require a lay-up warranty, which means you must store the boat in a secure location and not use it. Failing to follow the lay-up rules can void your coverage.

Named-Storm Deductibles

Some policies have a separate deductible for damage caused by named storms, like hurricanes. This deductible is usually a percentage of the boat’s value. For example, a 5% named-storm deductible on a $100,000 boat means you pay $5,000 for storm-related damage, in addition to your regular deductible.

Salvage and Wreck Removal

If your boat is totaled, the insurer may take it as salvage. With agreed value, you still get the full payout. With ACV, the payout may be reduced by the value of the salvage. Always read the fine print to understand how salvage affects your claim.

What You Should Do Now

Review your boat insurance policy and understand whether you have agreed value or ACV coverage. If you’re unsure, contact your insurer for a breakdown of what you’ll get in a total loss. If your boat is high-value or new, consider switching to agreed value for more protection. If your boat is older and you want to save money, ACV may be a better fit. Either way, make sure your policy reflects your boat’s current value and your needs.