How to Value a Boat for Insurance

Perhaps the most important decision boat owners need to make when purchasing boat insurance is how they want their claim to be settled in the event of a total loss of their boat. There are three types of boat insurance policies, each of which pays out on a total loss differently. The type of policy you choose will determine how you will be compensated for the loss of your boat and can impact the premium you will pay for the policy.

Learn more about the different ways to value a boat for insurance, and request a boat insurance quote from Maritime Insurance International today.

What Are the Main Types of Boat Insurance?

Boat insurance policies are classified according to the way a boat is valued:

• Actual Cash Value
• Replacement Cost Value
• Agreed Value

Each type of policy will pay differently in the event of the total loss of your boat. Let’s take a closer look:

What Is Actual Cash Value?

Very few boats these days are insured for their actual cash value, and many insurance companies don’t offer Actual Cash Value policies. As the name suggests, these policies pay only the actual market value of the boat at the time it’s declared a total loss, regardless of how much it’s insured for.

You won’t know how much you would be paid for a total loss until a loss actually occurs and the insurance company tells you what your boat is worth at the time of the loss. Determining the current market value of a boat is a lot like determining the current value of a used car. The insurance company uses published boat price guides and the prices of comparable vessels to come up with how much will be paid on a total loss actual cash value claim.

The uncertainty and the likelihood of a lower payout make this the least costly type of boat insurance in terms of the premium that you will pay.

What is Replacement Cost?

If you choose a Replacement Cost policy and suffer a complete loss of your boat, the insurance company will pay you what it would cost to buy a new replacement boat. If the same make and model costs $10,000 more today than it did when you bought your boat, then you’ll receive that higher amount as compensation for your loss.

There is, however, one caveat. Insurance companies typically place a ceiling on the amount by which the current value can exceed the policy coverage amount and still be paid in full. A 20% cap is typical. So, if you insure your boat for $50,000 and it’s current replacement cost is more than 20% above that amount, your claim for total loss will be paid up to $60,000 ($50,000 plus 20%), not the full replacement cost.

These policies are typically offered for new boats, and only for the first two or three years of ownership. After that point, the policy will likely be converted to an Agreed Value or Actual Cash Value policy. As you might expect, a Replacement Cost policy will cost you more than an Actual Cash Value policy.

What Is Agreed Value?

This is the most popular type of boat insurance policy, because it offers the best protection, with no depreciation of a boat’s value once the policy is in place.

If you choose this type of policy, you and the insurer will agree what the value of the boat is at the time you purchase the policy. That agreed upon value is the amount you’ll receive on a total loss claim even if the market value of your boat is less at the time of loss. For example, if the agreed value of the boat at the time the policy is written is $50,000, that’s how much you’ll receive for a total loss even if the current market value at the time of the loss is only $40,000.

Because the amount you’ll receive in the event of a total loss is fixed, the premium for an Agreed Value boat insurance policy is higher than the premium for an Actual Cash Value policy. That said, boat owners typically choose an Agreed Value policy because it offers the best cost/benefit ratio.

Get a Quote

Maritime Insurance International is a leading provider of boat insurance nationwide. Our experienced agents will be happy to discuss your options as a boat owner to find the best coverage for your needs at competitive rates.

Get a quote for boat insurance today.