What is an Agreed Value Policy?
Agreed value policies cover all damages without depreciation, with the exception of sails, spars, motors, canvas, cushions, and a few other specified items over a certain age. Agreed value simply means there is no depreciation or market value applied to your loss, leaving you with a larger payout settlement in the event of a claim. In the event of a total loss, the carrier will pay the exact amount listed on the declarations page of your policy minus your deductible.
What is an Actual Cash Value Policy?
Actual Cash Value (ACV) policies are less expensive, due to depreciation and or market value deductions. For example, in the event of a loss depreciation and market values are subtracted from your payout total. In the event of a total loss, the current market value of the vessel will be paid minus the depreciation variable/market value, minus your deductible amount.
What is the payout difference between an Agreed Value Policy and an Actual Cash Value Policy?
Please see the example below to understand the difference between an Agreed Value Policy and an Actual Cash Value for a brand new vessel.
Agreed Value Policy:
$50,000 Claim/Repair, $500 Deductible, Depreciation N/A, $49, 500 Payout
Actual Cash Value Policy:
$50,000 Claim/Repair, $500 Deductible, $8,000 Depreciation, $41, 500 Payout