The single most important decision in yacht insurance is one most owners never consciously make — because it's buried in the policy language. Agreed value vs. actual cash value determines how much you receive if your vessel is a total loss. Get it wrong and you could be hundreds of thousands of dollars short at the worst possible moment.
This guide explains both terms clearly, shows you the real dollar difference with Florida-specific examples, and tells you exactly how to confirm which type of policy you currently have. Written by a Fort Lauderdale marine broker who has seen what happens when owners find out at claim time.
What Each Term Actually Means
Actual Cash Value (ACV)
- Pays depreciated market value at time of loss
- Insurer determines value after the claim
- Depreciation reduces payout every year
- Standard in retail boat policies (Progressive, Geico, BoatUS)
- Cheaper premium — but higher real risk
- Common for vessels under $200K
- Can leave a large gap between payout and replacement cost
Agreed Value
- Pays the exact amount stated in the policy at total loss
- Amount agreed upfront — no depreciation applied
- You know exactly what you get before you need it
- Standard in specialty yacht insurance (Lloyd's, marine carriers)
- Higher premium — but true replacement protection
- Standard for vessels above $200K in Florida
- No gap between policy amount and payout
The Real Dollar Difference at Total Loss
The difference between agreed value and ACV is abstract until you see it in dollars. Here are three realistic Florida scenarios:
📊 Scenario 1 — $500,000 Motor Yacht, 5 Years Old
📊 Scenario 2 — $800,000 Yacht, 8 Years Old (Hurricane Total Loss)
📊 Scenario 3 — $250,000 Express Cruiser, 3 Years Old
How Depreciation Works Against You
Under an ACV policy, the insurer applies a depreciation schedule to determine the vessel's market value at the time of loss. Marine depreciation varies by vessel type, age, condition, and market — but here are typical depreciation rates that underwriters apply:
| Vessel Age | Typical ACV Depreciation | $500K Vessel ACV Payout | Agreed Value Payout | Difference |
|---|---|---|---|---|
| 1 year | 10–15% | $425,000–$450,000 | $500,000 | –$50K to –$75K |
| 3 years | 25–35% | $325,000–$375,000 | $500,000 | –$125K to –$175K |
| 5 years | 35–45% | $275,000–$325,000 | $500,000 | –$175K to –$225K |
| 8 years | 45–55% | $225,000–$275,000 | $500,000 | –$225K to –$275K |
| 12 years | 55–65% | $175,000–$225,000 | $500,000 | –$275K to –$325K |
The older the vessel, the bigger the gap. An ACV policy on a 12-year-old yacht could pay less than half the insured value at total loss — leaving you with a check that doesn't come close to replacing what you had.
The Stated Value Trap
This is the most misunderstood term in marine insurance. Many owners assume "stated value" and "agreed value" mean the same thing. They do not.
Stated value sets an upper limit on what the insurer will pay — but it does not guarantee that amount. At total loss, a stated value policy pays the lesser of the stated amount or the actual cash value. In other words, you name the value, but the insurer still applies depreciation — and if the ACV is lower, that's what you get.
Agreed value pays the stated amount at total loss, period. No ACV calculation. No depreciation. No negotiation.
If your policy says "stated value," you have an ACV policy with a ceiling — not agreed value coverage. Check your declarations page carefully. The words matter.
How to Tell the Difference on Your Policy
Pull out your policy declarations page and look for one of these terms:
- "Agreed Value" or "Agreed Amount" → You have true agreed value coverage ✓
- "Stated Value" → Depreciation may still apply at total loss ⚠️
- "Actual Cash Value" or "ACV" → Depreciation will be applied ✗
- No mention of valuation method → Call your broker and ask — assume ACV until confirmed otherwise
How Much More Does Agreed Value Cost?
The premium difference between agreed value and ACV is the most common reason owners choose ACV — and the most commonly regretted decision after a total loss.
| Vessel Value | ACV Annual Premium | Agreed Value Premium | Annual Difference | 5-Year Cost of Agreed Value |
|---|---|---|---|---|
| $200,000 | $2,200 | $2,600 | +$400/yr | $2,000 |
| $400,000 | $5,200 | $6,200 | +$1,000/yr | $5,000 |
| $600,000 | $8,000 | $9,500 | +$1,500/yr | $7,500 |
| $1,000,000 | $13,000 | $15,500 | +$2,500/yr | $12,500 |
On a $600,000 yacht, choosing ACV over agreed value saves you $1,500 per year. Over 5 years, that's $7,500 in premium savings. But if the vessel is a total loss in year 5, the ACV shortfall on a depreciated $600,000 vessel could be $200,000–$270,000. You saved $7,500 and lost $200,000+. The premium savings from ACV almost never justify the exposure — especially in Florida, where hurricane total losses are a real and recurring risk.
Partial Losses: Does the Valuation Method Matter?
For partial losses — damage that doesn't total the vessel — agreed value vs. ACV matters less but still has some impact. For partial losses, insurers typically pay the cost of repair regardless of valuation method, subject to your deductible. However:
- ACV policies may apply depreciation to replaced components — particularly on older vessels where the insurer argues a worn engine or outdated electronics should be replaced with equivalent-age parts, not new ones.
- Agreed value policies typically pay full repair costs to restore the vessel to its pre-loss condition without depreciation on components.
- The difference on a partial loss is smaller than on a total loss — but on a major repair ($80,000+ engine room fire, for example), depreciated component replacement under ACV can still leave you with a meaningful out-of-pocket gap.
Why This Matters More in Florida Than Anywhere Else
Florida's hurricane exposure makes the agreed value vs. ACV decision more consequential than in any other US marine market. Here's why:
- Total losses are more common. A direct hurricane strike doesn't cause fender damage — it causes total losses. Florida yacht owners face a real, recurring probability of total loss in a way that Pacific Northwest or Great Lakes owners simply don't.
- Post-storm markets crater. After a major hurricane, the used boat market in South Florida is flooded with salvage vessels and distressed sales. ACV "market value" in the months after a storm is depressed — meaning your ACV payout is calculated against a deflated market at exactly the moment you need to buy a replacement at full retail.
- Named storm deductible already hurts. You're already absorbing 2–10% of hull value as a named storm deductible. Adding ACV depreciation on top means you could be covering 50–60%+ of a total loss out of pocket. Agreed value limits the damage to the named storm deductible alone.
How to Check Which Type of Policy You Have Right Now
If you're not sure whether your current yacht policy is agreed value or ACV, here's exactly what to do:
- Step 1: Pull your policy declarations page — the one or two page summary at the front of your policy that shows your coverage amounts, deductibles, and premium.
- Step 2: Look for the hull coverage section. It will describe the basis of loss settlement — agreed value, stated value, or actual cash value.
- Step 3: If it says "agreed value" or "agreed amount," you're protected. If it says "stated value," "ACV," or nothing at all, call your broker.
- Step 4: If you're shopping for coverage, ask specifically: "Is this an agreed value policy?" Get the answer in writing, not verbally.
Every renewal is an opportunity to confirm your valuation basis and update your agreed value to reflect current market conditions. Insuring a vessel at $400,000 when it's worth $600,000 leaves you underinsured. Insuring at $700,000 when it's worth $400,000 may trigger over-insurance provisions. Work with your broker annually to set the agreed value at fair market value — supported by a current marine survey.
More from the NextGuard Marine Desk
Frequently Asked Questions
Make Sure Your Policy Is Actually Agreed Value
We review your current policy, confirm the valuation basis, and place agreed value coverage with specialty marine carriers if you're underprotected. Same-day response.
adolfo@nextguardinsurance.com · English · Español · Português
