" Replacement value (chosen by me around the for sale
price) Or replacement value (to build a new one) I chose option 1."
There is a lot of confusion out there regarding these terms, so here's a clarification, let's assume a 1997 boat:
1) Fair Market Value = What a similar condition 1997 vessel would sell for on the open market
2) New For Old- an insurance term meaning they will replace your 1997 parts
with this years (2015) model. Refers to parts
, not the entire boat.
3) Replacement Value- in a survey
, to the surveyor it means what it would cost to build a new 2015 boat; the number is many times higher than what a 1997 bat would be worth. An insurance company will not insure for replacement value as thusly defined, otherwise this would encourage people to buy 1997 vessels, insure them for 2015 values, and then have an "accent" and reap huge profits.
4) Agreed Value - in an insurance declarations page, it is the amount that the underwriter and the insured have agreed that the boat is worth. In the event of a total loss (sinking, hurricane
, fire, for example) it is the amount the insured will be paid, less any deductible. No haggling over depreciation- the amount to be paid is agreed on in advance. Very good coverage.
5) Actual Cash Value- in an insurance declarations page, it is an alternate way of valuing a total loss claim- kind of the opposite of Agreed Value. With an ACV policy, the adjuster calculates the value of the property destroyed at the time of the claim, so there may be depreciation applied. You do not know what your payout will be in advance of the claim. This coverage generally costs less than Agreed Value, and is often the only option offered on older yachts.
6) With insurance policies, do not assume that the word "replacement" means "New"!. "Replacement" in insurance policies usually refers to partial loss situations, in which the boat is NOT totaled. Replacement Cost means the cost to repair the Vessel with materials, parts, labor and equipment of like kind and quality to that which is being replaced so that the Vessel is in substantially the same condition as it was immediately prior to the loss. So in a partial loss
situation, you're making repairs
, not replacing an entire boat. An example of a partial loss might be a lightning
claim or a collision
. So it is quite normal to get new (2015) electronics
on your 1997 boat after your lightning
strike (partial loss); However, you'd never receive a whole new 2015 boat when making a total loss claim on a 1997 boat, since if the boat is totaled, it's not being "repaired". Make sense?