How to Compare Agreed Value vs Actual Cash Value Boat Insurance
When you are buying boat insurance, you’ll need to understand the difference between agreed value and actual cash value coverage for your boat.
That’s because you’ll choose whether your marine insurance policy has coverage on an Agreed Value basis or an Actual Cash Value (ACV) basis in the case of a total loss.
What is agreed value?
If you choose an agreed value policy, your boat insurance provider agrees to honour the value of the boat at the time the boat policy was written. For example, you buy a new boat for $50,000 and you insure it for that value. That is the amount you will receive if you have a total loss.
There is usually a time limit for agreed value coverage. A boat might have agreed value coverage until it’s a certain age, for example. Find out whether your agreed value policy will stay agreed value as your boat ages or whether it will convert to actual cash value when your boat reaches a certain age.
What is actual cash value (ACV)?
An actual cash value policy on your boat insurance will pay you the replacement cost of the boat in the event of a loss.
Note that depreciation, damage, and wear and tear are factored into the actual cash value you will receive.
How to compare agreed value vs actual cash value boat insurance coverage
Pros of agreed value coverage:
- An agreed value policy gives you peace of mind because the limit that is on your boat insurance policy is the amount that you are insured for after a total loss.
- Normally the value that is agreed upon will be the purchase price of your boat.
- Parts are replaced new-for-old without taking into account depreciation. That means the only amount you pay is your deductible.
Cons of agreed value coverage:
- An agreed value policy for your boat is more expensive than an actual cash value policy
- An agreed value policy may have a specific age limit for your boat.
- This kind of coverage isn’t usually available for sport and high-performance boats.
Pros of actual cash value:
- Actual cash value coverage is cheaper than agreed value coverage
- As your boat ages, your marine insurance provider may insist on an actual cash value policy and savings will come with that.
Cons of actual cash value:
- An actual cash value policy only pays up to the value of the boat at the time the boat was a total loss.
- Actual cash value coverage may not offer sufficient coverage if your personal belongings are stolen or damaged n your boat
- If you purchase new items to replace the ones you've lost, you'll be on the hook for the difference between the insurance payout and the cost of a brand new item.
You can also add a guaranteed replacement value endorsement to your boat insurance policy. Ask about any conditions that may apply.
Speak to a Western Financial Group boat insurance expert about agreed value coverage versus actual cash value coverage for your boat.
Boat insurance isn’t legally required in Canada, but it protects your investment in your boat. Marinas and lenders may require boat insurance. Speak to your Western Financial Group boat insurance expert about a marine policy for your boat.
