What Is an Agreed Value Policy?

An **agreed value policy** is a type of yacht or boat insurance where you and your insurer agree on the value of your boat upfront, before any claim happens. This means that if your boat is damaged beyond repair or destroyed, you’ll receive the full agreed amount in one go — no matter what the boat is worth at the time of the loss. It’s different from other types of insurance, like actual cash value (ACV), where the payout depends on the boat’s current condition and age.

Why Agreed Value Matters for Boat Owners

What It Solves

Boats, especially yachts, can be expensive and hard to replace. If you buy a new boat for $1 million, it might be worth less in a few years due to depreciation. With an ACV policy, you might get less than what you paid — or even less than what it would cost to buy a similar boat today. An agreed value policy avoids this problem by locking in the value at the time you buy the policy.

How It Works

When you get an agreed value policy, you and your insurer agree on a specific value for your boat. This value is based on the boat’s condition, age, and market value at the time of policy purchase. That number is written into the policy and doesn’t change unless you and the insurer agree to update it.

When You Get the Full Amount

If your boat is a total loss — meaning it’s damaged beyond repair — you’ll receive the full agreed value. This is especially helpful in cases like sinking, fire, or collision. You don’t have to wait for an adjuster to assess the boat’s current value. The amount is already set.

Agreed Value vs. Actual Cash Value (ACV)

Key Differences

• Agreed Value: The payout is fixed and agreed upon in advance.
• Actual Cash Value: The payout depends on the boat’s current market value at the time of loss, which can be lower due to depreciation and wear and tear.

Example of the Difference

Policy Type	Boat Value at Purchase	Boat Value at Loss	Payout
Agreed Value	$800,000	$600,000	$800,000
Actual Cash Value	$800,000	$600,000	$600,000

When to Choose Which

Agreed value is best for high-value boats or those that depreciate quickly. ACV is often cheaper and better for older boats or those with uncertain future value. You’ll want to weigh the cost of the premium against the potential payout.

How Deductibles Work with Agreed Value

What Is a Deductible?

A deductible is the amount you pay out of pocket before your insurance kicks in. For example, if your boat is damaged for $10,000 and your deductible is $2,000, you pay $2,000 and the insurance covers the remaining $8,000.

Named-Storm Deductibles

Some policies have a special deductible for storm-related damage. For example, a 5% named-storm deductible on a $1 million boat would mean you pay $50,000 if the damage is caused by a hurricane or tropical storm.

Scenario: Damage from a Storm

You own a $1.2 million yacht with an agreed value policy and a 5% named-storm deductible. A hurricane causes $400,000 in damage.

• Deductible: 5% of $1.2 million = $60,000
• Insurance Pays: $400,000 - $60,000 = $340,000
• You Pay: $60,000

Other Key Concepts to Know

Hull & Machinery Cover

This is the core of most boat insurance policies. It covers physical damage to your boat’s hull, engine, and other mechanical parts. Agreed value policies often include this coverage, and it’s what pays for repairs or replacement in a total loss.

Salvage and Wreck Removal

If your boat is damaged and needs to be removed from the water or a wreck site, the insurance may cover the cost of salvage and removal. This is especially important in a total loss situation.

Navigation Limits

Most policies limit where you can operate your boat. For example, a policy might restrict you to U.S. coastal waters or certain lakes. If you break these limits and have an accident, your claim could be denied.

Scenario: Damage Outside Navigation Limits

You own a $600,000 yacht with a policy that limits navigation to U.S. coastal waters. You take it to the Bahamas and it collides with a reef, causing $300,000 in damage.

• Policy Coverage: Not applicable — you were outside the allowed area.
• You Pay: Full $300,000

Agreed Value and Total Loss

What Is a Total Loss?

A total loss happens when the cost to repair your boat is more than its value. In an agreed value policy, you get the full agreed amount, even if the boat is still partially repairable.

Constructive Total Loss

This is when the cost of repairs is so high that it’s effectively a total loss, even if the boat could technically be fixed. Agreed value policies usually treat this the same as a full total loss.

Scenario: Constructive Total Loss

Your $900,000 yacht is damaged in a fire. Repairs would cost $850,000. The insurer determines this is a constructive total loss.

• Agreed Value: $900,000
• Insurance Pays: $900,000
• You Pay: $0

When to Review Your Agreed Value

Boat Upgrades and Modifications

If you add new equipment or upgrade your boat, you may need to increase the agreed value. Failing to do so could result in underinsurance, meaning you don’t get the full value in a claim.

Market Value Changes

If the market for your type of boat goes up, you might want to update your policy to reflect the new value. This is especially true for classic or collectible boats.

Scenario: Underinsurance

You own a $1 million boat and set an agreed value of $900,000. Later, you install a new engine worth $100,000 but don’t update the policy. Your boat is totaled in an accident.

• Agreed Value: $900,000
• Insurance Pays: $900,000
• You Pay: $100,000 (cost of the new engine not covered)

Final Takeaway

An agreed value policy gives you peace of mind by locking in the value of your boat upfront. It’s especially useful for high-value yachts and in situations where depreciation or market changes could reduce your payout. Make sure to understand your deductible, navigation limits, and any special provisions like named-storm deductibles. Review your policy regularly, especially after major upgrades or changes in the boat’s value. This way, you’ll be fully covered when it matters most.