Boat Owners Insurance - Agreed Value vs Actual Value

A boat owners insurance policy can pay for loss that occurs based on 2 different valuation methods. These methods help to establish the benefit level for the coverage as well as determine the cost of the policy. The valuation method that uses a lower amount to determine the value of a loss will be much less expensive than a policy that fixes the amount of loss at policy issue.

2 Valuation Methods

The 2 valuation methods used to determine the amount of policy benefit for boat owners insurance are the agreed value and actual value methods. The chief difference between these two methods is the use of the boat’s replacement value for a loss, as in the case of an agreed value policy versus a depreciated value in an actual value loss policy.

Agreed Value Policy

An agreed value policy would have a higher premium cost than an actual value policy. It sets an indemnity amount that is stated in the policy as agreed upon between the insured and the insurance company. An indemnity policy of $100,000 agreed value pays $100,000 for the total loss incurred by the boater.

A partial loss in an agreed value policy would provide for the replacement value of equipment loss or damage that occurs. This replacement value tends to be higher than the original value of the item resulting in a higher benefit level. For example, the theft of a 4-year-old GPS navigation system from a boat covered under an agreed value policy results in a benefit for the replacement cost of a comparable newer GPS navigational system.

Actual Value Policy

With an actual value policy, the premium cost is less because the replacement value that is paid for a loss is up to its actual value, less its depreciated value. This benefit may result in having the boat owner make up the difference in loss out-of-pocket. This type of policy plan may be desired by boat owners who are not concerned with receiving the full present cost of an item loss due to theft or damage or where the boat may be older.

Determining which type of benefit valuation to use depends on the preference of the boat owner. Because different insurance companies offer different rates and coverage limits associated with loss, it is difficult to come up with a universal pricing standard that demonstrated the better policy type for you. Doing a comparison of rates by contacting the insurance companies individually is the best way to find the boat insurance coverage that is best for your needs.

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