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Old 25-03-2011, 10:01   #1
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Boat Insurance: Agreed Value vs Actual Cash Value Policies

Launch is a good time to start reviewing your boat insurance policy. One of the questions I often get asked is what's the difference between Agreed Value and Actual Cash Value policies?

The primary difference is how claims are settled following a loss. With Agreed Value coverage, the amount paid following a total loss is the amount shown on your policy - without depreciation. Partial loss claims are settled new-for-old without depreciation.

With Agreed Value Policies you can insure your vessel up to the full value to replace it with a brand new one. However, with so many vessels no longer in production this value can be difficult to determine. A marine insurance specialist can assist in determining a value.

With Actual Cash Value, depreciation is applied on all claims. The amount you receive is the current market value of the boat or damaged equipment at the time of the loss.

If you have any questions about boat insurance I'd be happy to answer them.
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Old 30-03-2011, 09:06   #2
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

I have more questions than answers and I'm sure that with one answer from you I will have ten new questions. I am in the process of starting a Charter Company and we will be a crewed charter with a SIX-PACK license. Because of the way we are setting up our company technically we are leasing the yacht (2006 50' Beneteau Cyclades) to start.

My questions are this;
1. I’m sure there are different insurances when you have customers, right?
2. What are the restrictions
3. Different countries and cruising areas
4. IF we wanted to offer scuba diving (I’m an instructor)
5. THIS IS JUST A STARTER LIST OF QUESTIONS.

HELP LOL, I really need to know all the different options and associated costs. Hopefully I gave you enough info to get started.
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Old 30-03-2011, 09:22   #3
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

Insurance companies are less likely to write agreed value polcies in today's market. My boat has an agreed value 30% higher than what I could sell it for. Just saying, no intent implied!
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Old 30-03-2011, 09:33   #4
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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The primary difference is how claims are settled following a loss. With Agreed Value coverage, the amount paid following a total loss is the amount shown on your policy - without depreciation. Partial loss claims are settled new-for-old without depreciation.

With Actual Cash Value, depreciation is applied on all claims. The amount you receive is the current market value of the boat or damaged equipment at the time of the loss.

.
So if the insurance policy states that the hull coverage is for an actual cash value of say 200K.....that is not really the number that I would expect to receive for total loss, but something else minus depreciation. Since these policies are issued each year why not put that depreciation number into the policy so that the people know what they are paying for? Seems like a total rip off to me by using a term such as actual cash value implying that you are insuring for the actual cash value which is some unknown number until the time of loss! Seems like all policies should be written as agreed value coverage, but I'm betting that is not the case plus I'm betting that the agreed value coverage premium is higher that the actual cash value premium. IMHO
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Old 04-04-2011, 09:25   #5
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

Actually "cash value" is known by simply looking it up in the BUC blue books. If your boat is not in the BUC blue books than they write "agreed value" policies. Considering how few insurance companies there are that are willing to write cruiser insurance you have little or no bargaining power with them. Outfits like I.M.I,S. take extra effort to try to put together a policy packet most aligned to the real world of cruising and then getting the actual insurance company to handle it.
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Old 04-04-2011, 10:59   #6
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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Actually "cash value" is known by simply looking it up in the BUC blue books. If your boat is not in the BUC blue books than they write "agreed value" policies. .
Seem like if your boat has a buc book price then that should be what you get at settlement for a total loss. Not sure I see the difference. I suppose there might be some haggling about what condition your boat is in High buc book vs low, but all the policies I've had shows a given number for hull value. I guess it's agreed and that is what my premium is based, but the word agreed value is not in the policy.
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Old 04-04-2011, 19:33   #7
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

There is a little zinger in the "agreed value" type polices that maybe an expert actually in the marine insurance business can clarify.
- - That is that your stated "agreed value" needs to be realistic and close to the BUC value - and - not more than what you paid for the boat. For instance, if you bought the boat for $100K and the BUC value is near that and you insure the boat for $200K, the insurance company will not pay you the $200K for a total loss.
- - The flip side is also just as dangerous. If your boat has a market value of $100K and you insure for $50K to keep the premiums down you can get in serious trouble and even lose the boat. This happened to several boats in Hurricane Ivan. The repair costs of the boat exceeded the "policy limit" but was below the actual value of the boat. The owners had a choice of not filing a claim or accepting the policy limit payment and turning title over to the insurance company.
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Old 04-04-2011, 20:47   #8
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

All I can add is be careful how much value you put in internet advice (including this). Having an agreed value policy guarantees you little in the event of a total loss. If you are shopping for insurance, regardless of what an agent tells you, ask to see the policy beforehand. If they refuse, run away. If they provide it, read it carefully and especially read carefully the agreed value policy.
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Old 05-04-2011, 04:39   #9
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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- - The flip side is also just as dangerous. If your boat has a market value of $100K and you insure for $50K to keep the premiums down you can get in serious trouble and even lose the boat. This happened to several boats in Hurricane Ivan. The repair costs of the boat exceeded the "policy limit" but was below the actual value of the boat. The owners had a choice of not filing a claim or accepting the policy limit payment and turning title over to the insurance company.
Seems like you could accept 49K for the "repairs" and retain title to the boat.
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Old 05-04-2011, 07:54   #10
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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Seems like you could accept 49K for the "repairs" and retain title to the boat.
Doesn't work that way. When the adjustor/surveyor comes up with a number of dollars to repair the boat, that is not negotiable - you can only accept it or reject it.
- - The critical point is as SV Illusion stated - read the fine print before you sign up for the insurance - or at least read it very carefully after you get the actual policy. You can cancel the insurance at any time and then start all over looking for another policy.
- - I have never seen a policy, either marine or auto that did not contain a clause that if they pay out the face value of the policy they take ownership of the boat/car/whatever is being insured.
- - And it was definitely the case for some boats in the massive Hurricane Ivan losses in Grenada. The young cruisers with nice boats who couldn't afford to pay the premiums for "full coverage" were shocked and more than tearful when they lost their boats to the insurance company because the repair costs reached or exceeded the policy limit.
- - Which brings up the question of whether it is smarter to not insure the boat rather than under-insure the boat. The "repair costs" are based on parts and the cost of a professional (boatyard/whatever) people doing the job - not - you doing the job yourself. So it is quite easy to have the total dollar cost of repair skyrocket up to the policy limit even for damage that seems to us to be not that extensive.
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Old 05-04-2011, 08:17   #11
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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Doesn't work that way.
That doesn't surprise me about insurance claims.
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Old 05-04-2011, 08:18   #12
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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Originally Posted by osirissail View Post
There is a little zinger in the "agreed value" type polices that maybe an expert actually in the marine insurance business can clarify.
- - That is that your stated "agreed value" needs to be realistic and close to the BUC value - and - not more than what you paid for the boat.
Not quite true. Our boat is insured for an agreed value policy at 21k more than we paid for it. With each upgrade, or set of upgrades, we have re-established value and the insurance company has upped the agreed value accordingly.

Of course we have way more than the 20k difference into it but the reality is if your surveyor & broker can show the boat is worth what they say it is most companies will up the agreed value policy if you document it and get a fair market appraisal. It will cost you more but you'll be adequately covered for a fairer replacement value.


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Doesn't work that way. When the adjustor/surveyor comes up with a number of dollars to repair the boat, that is not negotiable - you can only accept it or reject it.
Our boat was hit on her mooring by a guy who broke free. The damage was assessed at 20.5k & 22k by two surveyors. The adjuster accepted the higher of the two numbers. The real damage, when all was said and done, was more like 26k and the insurance company paid this difference with zero issues. While you often can't negotiate an estimate for repairs up front you certainly can after the repair has been completed or during the repair when addition issues are found as we did. Even the best surveyor will miss things that get found once the repair has begun and things opened up. A good insurance comapny should honor actual cost of repairs minus your deductible unless you're up against the agreed value or actual cash value..

I have a friend who had a total loss to his 2 year old Regulator center console, with agreed value policy. The insurance company sent him a check for the agreed value minus his 1% hull deductible within two weeks. Pretty simple with good honest insurance carriers. He had a new boat less than a month later..
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Old 05-04-2011, 08:20   #13
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

Problem is that the cruiser insurance business is too small so there are very few reputable companies in the market. With virtually little or no competition they have a "seller's market" and we are stuck with what they are offering or nothing. You can count the companies on one hand even after loosing a finger or two to an electric winch/windlass accident.
- - And this is one area where the reputation and performance of an individual insurance company can make all the difference in the world. Some few companies are both fair and moral in their handling of claims and are the ones to seek out when you get ready to buy insurance. But there is no shortage of "other" companies that will "fine print" you to death and stiff you when it comes time to "pay the piper." Asking around of people who have actually had losses is about the only way to separate the good ones from the "not good" ones.
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Old 05-04-2011, 08:35   #14
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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Problem is that the cruiser insurance business is too small so there are very few reputable companies in the market. With virtually little or no competition they have a "seller's market" and we are stuck with what they are offering or nothing. You can count the companies on one hand even after loosing a finger or two to an electric winch/windlass accident.

Totally true and it is very expensive... But for the average coastal cruiser there are many options.
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Old 05-04-2011, 08:45   #15
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Re: Boat Insurance: Agreed Value vs Actual Cash Value Policies

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. Our boat is insured for an agreed value policy at 21k more than we paid for it. With each upgrade, or set of upgrades, we have re-established value and the insurance company has upped the agreed value accordingly.

..
Maine, who are you insured with? I just looked at my policy and it's an actual cash value policy with Markel. Not sure it they offer the agreed value policy, but that seems like the way to go since there are so many loopholes with the actual cash value one. I like the idea of establishing the value up front rather than after a loss, but many companies probably prefer the actual cash value type policy and may not write the other or if they do at a increased premium.
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