How Agreed Value Works in Yacht Insurance

Scenario: Damage During a Lay-Up Period

Your Boat

• Agreed value: $400,000
• Lay-up period: November to March
• Deductible: 5% ($20,000)

What Happens

Your boat is damaged by a storm during the lay-up period. You followed the lay-up warranty, so your claim is valid. The damage is $120,000. You pay your deductible of $20,000, and the insurer covers the remaining $100,000.

Agreed Value and Other Key Concepts

Hull & Machinery Cover

Hull & machinery cover is the most basic part of yacht insurance. It covers damage to your boat’s structure and mechanical systems. Agreed value ensures that you get the full value of your boat in a total loss under this coverage.

Protection & Indemnity (P&I)

Protection & Indemnity (P&I) covers third-party liabilities, such as damage to another boat or injury to someone else. While P&I is a separate type of insurance, it often works alongside hull insurance. Agreed value doesn’t directly affect P&I, but it helps you focus on covering your own boat’s value first.

Salvage and Wreck Removal

If your boat is a total loss, the insurer may pay to remove it from the water — this is salvage and wreck removal. This is usually included in hull insurance. Agreed value ensures you get the full value of your boat, even if the wreck removal costs are high.

Agreed Value in Action: Real Scenarios

Scenario 1: Classic Yacht Total Loss

Your Boat

• Classic yacht, 40 years old
• Agreed value: $800,000
• Deductible: 5% ($40,000)

What Happens

Your classic yacht is damaged in a fire and declared a total loss. You receive the full agreed value of $800,000. You pay your deductible of $40,000, and the insurer pays you $760,000. Because you had agreed on the value upfront, you don’t have to argue about the boat’s current market value.

Scenario 2: Damage During a Named Storm

Your Boat

• Agreed value: $600,000
• Named-storm deductible: 10% ($60,000)
• Damage: $150,000

What Happens

Your boat is damaged by a hurricane. You pay the named-storm deductible of $60,000. The insurer covers the remaining $90,000. You receive $90,000 from the insurer, and you pay $60,000 out of pocket. The agreed value ensures you get the full value of the damage, even though the deductible is higher.

Scenario 3: Damage During a Lay-Up Period

Your Boat

• Agreed value: $300,000
• Lay-up period: November to March
• Deductible: 5% ($15,000)
• Damage: $80,000

What Happens

Your boat is damaged during the lay-up period. You followed the lay-up warranty, so your claim is valid. You pay your deductible of $15,000, and the insurer covers the remaining $65,000. You receive $65,000 from the insurer, and you pay $15,000 out of pocket.

Agreed Value vs. Other Coverage Options

Agreed Value vs. Replacement Cost

Replacement cost is when you get enough money to buy a new boat of similar value. This is different from agreed value, which gives you a fixed amount. Replacement cost is more common in car insurance, but it’s less common in yacht insurance because boats are often custom or classic.

Agreed Value and Depreciation

With actual cash value, your payout is reduced by depreciation. With agreed value, depreciation doesn’t matter — you get the agreed amount regardless of the boat’s age or condition. This is especially helpful for older or custom yachts that may be hard to value accurately.

Choosing the Right Agreed Value

How to Set Your Agreed Value

When you buy your policy, you and your insurer agree on a value. This should be based on the boat’s current market value, but it can also include upgrades, custom features, or sentimental value. Make sure the agreed value reflects what you’d expect to get in a total loss — not just what the boat is worth today.

Reviewing Your Agreed Value

It’s a good idea to review your agreed value every few years, especially if you’ve made upgrades or the market has changed. If your boat is now worth more, you can increase the agreed value. If it’s worth less, you might be overinsured — which means you’re paying more than you need to.

Final Takeaway

Agreed value in yacht insurance gives you a clear, fixed payout in the event of a total loss. It’s especially useful for older, custom, or classic yachts where market value can be hard to determine. Make sure you understand your deductible, navigation limits, and lay-up requirements to get the most out of your policy. Always review your agreed value every few years to ensure it still reflects your boat’s worth.