Agreed value vs market value for boat insurance

Agreed value and market value affect how your boat may be valued if it is stolen or written off.

With agreed value, the insurer accepts a set value for the policy period.

With market value, the insurer works out what the boat was worth around the time of the loss using the definition in the policy.

The important thing is to understand how the policy you are buying actually works.

What is agreed value?

Agreed value means the insurer has accepted a value for the boat.

That amount is normally shown on the policy schedule or certificate.

If the boat becomes a covered total loss, that value is usually an important starting point for the settlement.

It does not necessarily mean the exact number on the schedule will be paid with no adjustments.

The policy may still allow deductions such as an excess or unpaid premium.

What is market value?

Market value is generally based on what the boat was worth immediately before the loss.

The exact definition differs between policies.

An insurer may consider things such as:

• age
• condition
• specification
• location
• comparable boats
• the cost of replacing it with a similar boat

Market value is not necessarily the highest asking price you can find online.

The policy definition is what matters.

Is agreed value better?

Not automatically.

Agreed value can give you more certainty about the value being used if the boat becomes a total loss.

That may be useful where a boat is difficult to value.

For example:

• an older yacht in unusually good condition
• a restored boat
• a custom-built boat
• a boat with significant accepted modifications

Market value can still suit owners who are comfortable with the insurer assessing the value around the time of a claim.

Rather than asking which label is better, ask:

How would this policy value my boat if it was written off?

The amount on the schedule may not be the final payout

This is easy to misunderstand.

A policy may show an insured amount of $100,000.

That does not automatically mean a covered total loss results in exactly $100,000 being paid into your account.

Under market value cover, the insurer may assess the boat as being worth less than the maximum shown on the schedule.

Even under agreed value cover, policy deductions may apply.

NRMA's current boat wording, for example, uses agreed value but its total-loss examples show that excesses, unpaid instalments and unused registration can affect the amount paid.

Check both the insured amount and the total-loss settlement section.

Total loss and partial damage are different

Agreed value and market value matter most where the boat is stolen and not recovered or damaged badly enough to be treated as a total loss.

They do not mean the full insured value is paid whenever the boat is damaged.

If a boat with a $100,000 agreed value suffers $10,000 of covered damage, the claim will normally be dealt with under the repair provisions of the policy.

The full agreed value is not simply paid because the boat needed repairs.

What can be deducted from a total-loss payment?

It depends on the policy.

Possible adjustments can include:

• an excess
• unpaid premium or instalments
• registration refunds or credits
• salvage arrangements
• other deductions allowed by the wording

That is why agreed value should not be described as a guaranteed cheque for the number printed on the schedule.

What about new boat replacement?

New replacement cover is a separate policy benefit.

Some insurers may replace an eligible newer boat with a new equivalent after a total loss.

There can be conditions around:

• the boat's age
• whether you bought it new
• whether you are the first registered owner
• whether a suitable replacement is available

Do not assume agreed value and new replacement cover mean the same thing.

How does an insurer decide an agreed value?

The insurer may accept the amount requested or ask for evidence.

This could include:

• a purchase invoice
• a marine valuation
• photographs
• dealer information
• details of modifications or equipment

A valuation does not force the insurer to accept the amount.

It is evidence for the insurer to consider.

Nautilus provides a useful current example. Its Premium Pleasure Craft wording has special agreed-value treatment for some eligible new boats during their first two years. The basis can later move to market value unless another agreed value is requested and accepted.

What about older, restored or modified boats?

These boats can need more thought.

A common production boat may have plenty of comparable sales.

An older timber yacht or heavily restored boat may not.

If you have spent a large amount on a refit, that also does not automatically mean the boat's insurable value has increased by the same amount.

Keep useful evidence such as:

• invoices
• photographs
• survey reports
• valuation reports
• details of major upgrades

Our guide to boat insurance for older, timber or modified boats looks at this in more detail.

Does agreed value cost more?

It can, but there is no rule that it always will.

The amount insured is only one part of the premium.

Other factors can include the boat, age, construction, storage, use, claims history, cruising area, excess and selected cover.

Our guide to how much boat insurance costs in Australia explains those factors in more detail.

Can agreed value change at renewal?

Yes.

The insurer may review the amount when the policy renews.

You may also be able to request a different value.

Check your renewal notice rather than assuming last year's figure will continue unchanged.

This can be particularly important after:

• a major refit
• significant accepted modifications
• changes in the market
• changes in the boat's condition

Australian policy examples

Australian providers do not all use the same approach.

Club Marine uses market value unless an agreed value has been accepted.

NRMA describes its boat product on an agreed-value basis.

Nautilus has different treatment depending on the boat and circumstances.

Pantaenius also provides a useful example. Its All Risk and Prime products use different valuation approaches for different target markets, showing that agreed value versus market value is not a simple "good policy versus bad policy" distinction.

What should you compare?

Before choosing cover, check:

• whether the policy uses agreed or market value
• the amount shown on the schedule
• how market value is defined
• what deductions may apply
• whether modifications are included
• whether a valuation is needed
• whether the value can change at renewal
• whether there is separate new replacement cover

That gives you a much clearer picture than comparing premium alone.