How Agreed Value Works for Yacht Insurance

Agreed value in yacht insurance means you and your insurer agree on a specific amount your boat is worth before you buy the policy. If your boat is ever damaged or destroyed, you get that agreed amount in a total loss claim — no matter what it’s worth at the time. This gives you more control and peace of mind, especially for high-value or classic yachts.

Agreed Value vs. Actual Cash Value (ACV)

Most boat insurance policies use actual cash value (ACV), which is the current market value of your boat, minus depreciation. But with agreed value, you and your insurer set a fixed value upfront. This is especially useful for classic or custom yachts, where depreciation isn’t always clear or fair.

Why Agreed Value Matters

• Guaranteed payout: You know exactly how much you’ll get in a total loss.
• More accurate for unique boats: Classic or custom yachts may not have clear market values.
• Higher premiums: Agreed value policies usually cost more than ACV policies because the payout is guaranteed.

How Agreed Value Works in a Total Loss Claim

Let’s say you have a 40-foot custom-built yacht with an agreed value of $600,000. If your boat is destroyed in a storm, your insurer will pay you the full $600,000 — not the current market value, which might be lower due to depreciation or market conditions.

Example of Agreed Value in Action

Agreed Value	Damage Type	Claim Payout
$600,000	Total loss (boat destroyed)	$600,000
$600,000	Partial damage (engine failure)	Repair cost minus deductible

Agreed Value and Deductibles

Deductibles (or excess) are the amount you pay out of pocket before your insurance kicks in. With agreed value, your deductible is based on the agreed amount — not the current market value.

Scenario: Damage with a 5% Deductible

You have a $500,000 yacht with agreed value coverage and a 5% deductible. Your boat is damaged in a storm, and the repair cost is $100,000.

• Deductible: 5% of $500,000 = $25,000
• Insurance pays: $100,000 - $25,000 = $75,000

Scenario: Total Loss with a Named-Storm Deductible

Your $700,000 yacht is totaled in a hurricane. You have a 10% named-storm deductible.

• Deductible: 10% of $700,000 = $70,000
• Insurance pays: $700,000 - $70,000 = $630,000

Agreed Value and Hull & Machinery Coverage

Hull & machinery coverage is the part of your policy that pays for damage to your boat’s structure and mechanical systems. With agreed value, this coverage is based on the agreed amount, not the current value.

How It Affects Claims

If your boat is damaged and the agreed value is $500,000, your hull & machinery coverage will cover up to that amount — minus your deductible. This ensures you’re not underinsured due to depreciation or market fluctuations.

Agreed Value and Navigation Limits

Most yacht insurance policies have navigation limits, which define where your boat is allowed to sail. If damage happens outside these limits, your claim may be denied — even with agreed value coverage.

Scenario: Damage Outside Navigation Limits

Your $600,000 yacht is insured with navigation limits up to 100 nautical miles offshore. You take it 150 miles out and it’s damaged in a storm.

• Damage cost: $120,000
• Claim status: Denied due to navigation limits
• You pay: Full $120,000

Agreed Value and Lay-Up Warranty

If you’re not using your boat for a period, you may put it into lay-up. Some policies require a lay-up warranty — a set of conditions you must follow to keep coverage active. This includes things like securing the boat, draining fuel, and using a winterizing service.

Scenario: Damage During Improper Lay-Up

Your $400,000 yacht is in lay-up but not properly winterized. It’s damaged by freezing temperatures.

• Damage cost: $80,000
• Claim status: Denied due to breach of lay-up warranty
• You pay: Full $80,000

Agreed Value and Total Loss / Constructive Total Loss

A total loss means your boat is destroyed beyond repair. A constructive total loss means it’s damaged so badly that it’s cheaper to replace it than to repair it.

Agreed Value in Total Loss Claims

If your $550,000 yacht is totaled in a fire, your insurer will pay the full agreed value — $550,000 — regardless of the current market value.

Agreed Value in Constructive Total Loss Claims

If your $650,000 yacht is damaged in a collision and the repair cost is $600,000, your insurer may declare it a constructive total loss. You’ll get the full $650,000, minus your deductible.

Agreed Value and Salvage / Wreck Removal

If your boat is totaled, your insurer may sell the wreck for salvage or arrange wreck removal. With agreed value, the insurer keeps the salvage value and pays you the full agreed amount.

Example of Salvage in a Total Loss

Your $500,000 yacht is totaled. The insurer sells the wreck for $20,000 in salvage.

• Agreed value: $500,000
• Salvage value: $20,000
• You receive: $500,000 (insurer keeps the $20,000)

Agreed Value and General Average

General average is a maritime law concept where all parties share the cost of a loss if it was made to save the ship or cargo. This is rare but can apply in extreme situations like abandoning cargo to save the boat.

Agreed Value and General Average Claims

If your $700,000 yacht is damaged during a general average event, your agreed value coverage will pay the full amount — minus your deductible — regardless of the contribution from other parties.

Agreed Value and Crew Liability

If you have crew on board, crew liability coverage protects you if a crew member is injured. Agreed value doesn’t directly affect this, but it ensures your boat is fully covered in case of a claim that involves damage to the vessel.

Agreed Value and Personal Effects

Personal effects coverage protects your belongings on board — like electronics, clothing, and gear. This is separate from the agreed value of the boat itself, but it’s often included in the same policy.

Example of Personal Effects Coverage

Your $600,000 yacht has $10,000 in personal effects coverage. A fire destroys your electronics and gear.

• Damage to boat: Covered under agreed value
• Damage to personal items: Covered up to $10,000

Agreed Value and Pollution Liability

Pollution liability covers environmental damage caused by your boat — like an oil spill. This is usually a separate policy, but agreed value ensures your boat is fully covered in case of a total loss from a pollution incident.

Final Takeaway

If you own a high-value or custom yacht, agreed value insurance gives you the best protection. It ensures you get the full amount you and your insurer agreed on — not the current market value. Make sure you understand your policy’s navigation limits, lay-up requirements, and deductibles to avoid surprises in a claim.