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Thread: The Different Kinds of Loss Valuation on a Marine Policy

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    The Different Kinds of Loss Valuation on a Marine Policy

    If you have a total loss on your boat from a covered cause of loss then the insurance company is going to determine your final payout in one of three ways; Actual Cash Value (ACV), Agreed Value or Replacement Cost. Here is an overview of how each is calculated.

    Agreed Value: This number is a number that is agreed upon by you and an underwriter. Typcially the amount that goes on the policy declarations page is your purchase price (including taxes). What you can not do on an agreed value policy is over insure your boat. An agreed value policy doesn't look at what the boat is worth. If you got an awesome deal, which right now is nearly every purchase, you can not insure for the "value" of the boat. You can only insure up to your purchase price. Many people ask me "why?" Similest explaination is: If you were a dishonest person (oryou buy the boat and fall on hard times a year later) and you bought a boat for $50,000 but insured it for $85,000, what is to keep you (the dishonest or desparate person) from going out and sinking the boat and takinga $35,000 profit from insurance? I know that 99.9% of the people on this forum and in the performance boating community in general would never even think of doing something like this, but insurance companies have to think "worst case scenarios" and that is worst case. The purpose of an agreed value policy is to insure your financial interest in your boat, not the boat itself. (Technically speaking) So, to sum it up: In the event of a total loss the insurance company would pay you the amount on the declarations page less your deductible, no negotiating or going back and forth on value. That is the beauty of agreed value, the number is set in stone. This option is more expensive than an ACV policy.

    Replacement Cost: A replacement cost policy is for boat 3 years and newer. Once a boat on a RC policy hits 4 years old, it converts to Agreed Value automatically. A replacement cost endorsement or policy will all for you to replace your boat of LIKE KIND and VALUE (i.e. same model, same year, same engines) regardless of the cost to do so. This option is more expensive than both ACV and Agreed Value

    Actual Cash Value aka ACV: 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. If there is a good valuation on the boat and the boat is insured inline with the market value of the boat, then there won't be much out of pocket. This is where a good marine surveyor comes in to help you establish a market value and put it on record.
    Last edited by Insurancegoddess; 10-20-2010 at 09:33 AM.
    Stacy Shute

    Wake Zone Marine - Insuring your need for Speed!
    Phone: 480-357-9663 ext. 101
    Email: stacy@wakezoneinsurance.com

    TO OBTAIN A QUOTE: http://www.wakezoneinsurance.com/Quote_form.html

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