Agreed Value or Actual Cash Value? What Your Yacht Policy Pays After a Total Loss

Most owners look at two numbers on a yacht policy: the premium and the hull value. The hull value feels like a promise — the amount you would receive if the boat were lost. Whether it actually is depends on a line many owners never read: how the policy settles a loss.

There are two common answers, and they can be a long way apart.

Actual cash value: the boat as it was that morning

An actual cash value policy pays what the vessel was worth at the moment of the loss: the cost to replace it, less depreciation for age and wear. The hull value on the declarations page sets the most the insurer will pay, not what it will pay.

Boats depreciate. A yacht insured for its purchase price five years ago may be valued well below that figure when the claim is adjusted — and the owner who expected to replace the boat finds the cheque falls short.

Agreed value: the number settled at the start

An agreed value policy fixes the hull value when the policy is written. You and the underwriter agree what the vessel is worth, usually supported by the purchase price, a recent survey, or both. If the boat is a total loss, that agreed amount is what the policy pays. There is no argument afterwards about depreciation, because the value was settled up front.

The Masterpiece® yacht policies we place go a step further: on a total loss the full agreed value is paid with no deductible, and for eligible vessels the Masterpiece Yacht Select plan can provide replacement cost of up to 120%.

Partial losses are a separate question

Most claims are not total losses. A grounding, a dock strike or storm damage is repaired, not replaced, and the policy's partial-loss terms decide who pays for what.

Some policies apply depreciation to partial losses — often to items that wear out, such as sails, canvas, electronics and engines — even when the hull is insured at agreed value. Others settle many partial losses at replacement cost, paying for repairs or replacement parts without deducting for depreciation. Two policies with the same agreed value can therefore treat the same repair very differently.

What to check before your next renewal

• How total losses are settled. Agreed value or actual cash value? It is in the loss-settlement wording, not always on the declarations page.
• Whether a deductible applies to a total loss.
• How partial losses are settled, and whether depreciation applies to sails, canvas, machinery or electronics.
• Whether the agreed value is still right. A refit, new electronics or a repower can leave a boat under-insured; a value that has drifted well above the market will be questioned by the underwriter. Review it at each renewal.
• What happens when repairs approach the insured value — when the policy treats a badly damaged boat as a total loss.

If you are not sure how your current policy answers these questions, we are glad to go through it with you.