How do you set the "Replacement Value" on your insurance policy?

[ChuckW]

That time of year again for me, my insurance policy is renewing. There's been much talk here about the "best" insurance company, the "best" price for your policy etc. There's a lot that goes into the risk and premium of a policy, but one area I didn't see much discussion on was the "Replacement Value" of the boat.

My first 3 years of coverage, the carrier held the replacement value at the purchase price. This year they sent me a renewal with a lower replacement value, in their words, "based upon market value". Well how did they value it I ask and what if I don't like their number? It's all about what risk do I want to have should I suffer a complete loss of the boat, not some mythical number they throw at me, no?

So how do you go about determining your risk when it comes to the "Replacement Value" of your boat?

• Take the insurance companies word for it?
• Try to peg your boat against sales activities?
• Determine how much it will "cost" you to replace the girl and convince the insurance co. you need coverage of $x?

Just curious, to me its all about the risk, not some mythical market value. In other words, would I really want a check that would allow me to go buy the same boat in presumably the same condition with the same features - aka "Market Value"? Or do I want to cover the cost in replacing the boat through a reputable dealer which will stand behind it - aka "Replacement Value"? The likely-hood of getting the same boat, in the same condition, with the same features is so remote as to be laughable. So a "market value" number to me is only part of the cost in the risk that needs to be insured. "Replacement value" and "market value" to me are two very different numbers. :huh: If I suffer a full loss, I want the insurance to make me "whole" without dipping into my pocket beyond deductibles. Otherwise it's just a crap shoot.

Cheers

 

[C-SIDE]

When I insured my boat, they originally insured it at purchase price. However, I think I got a pretty good deal and if something were to happen, I wasn't sure if I could replace my boat at the price I purchased it for. As a result, I told them to insure it for $5K more - they did no questions ask. It just costs more to insure

I'd be interested to hear what others are doing

Hope that helps
Chris

 

[Sundancer]

I gave them the value and they took it. I'm sure if it was WAY out of line they would have negotiated, but it was within reason according to them so I just pay the rate for that value.

 

[Dancin Dave]

Agreed value, it costs more but you can insure it up to its appraised value. If you are so inclined. I believe you can get screwed with the "replacement cost" route

 

[dpmulvey]

Replacement cost based on Blue Book Value for the same boat of the same year with the same equipment.

Mine is fair. I am leaving it as is despite the down economy. The economy will turn. Trying to get an insurance company to up the ante on a depreciating asset....Good Luck.

 

[douglee25]

Like Dave mentioned, go with an agreed value policy. Typically they will require a survey in order to appraise the value of the boat.

Most insurance companies are cracking down on 'over-insuring' things like boats, jewelry, etc. In the past, people would over-insure, then all of a sudden the item turns up missing? The owner files a claim and then tries to cash in for more than market value.

Doug

 

[Mr Salt]

When my insurance came up this year for renewal this year the broker and I went to the market and looked at what the model boat is selling and we set the value a tad higher than the highest boat in the group. The good news is the deductible got lower as it is 1% of the insured value. I would do the vlauation with the broker so you are in agreement.

 

[highslice]

I went with an agreed value policy. I gave them the number. It is not an amount that I could replace the boat with a brand new one, but in the event of a total loss I would be made completely whole. It didn't cost much more either.

 

[320Bob]

Agreed value and I intend to keep it at that level.

 

[HUMPH]

Mine was sticky since I bought at such a low price IMHO. I had a couple of upgrades I knew I
would do so I went $10K over my purchase price. Still got a good deal though...

 

[tobnpr]

Take it from an ex-agent...
Agreed Value. Anything else is leaving yourself open to a good screwing in the event of a total loss.

 

[rondds]

The way it was explained to me by an agent that responded to my request for a quote, the value you put on the boat is not necessarily what you will get if the boat is totalled. Example: You paid $100K for your boat in 2005. You insure it for $100k. 5 years later, your boat sinks. You have been paying for a policy that "insures" the boat for $100k. Problem is they'll give you, say, $75K for the loss, b/c of depreciation. After hearing this, I called Allstate (my insurer) and they confirmed this. So I re-valued the boat and wound up saving about $175 per year.

There may be policies that do NOT work this way, but it's definitely a question worth asking your agent b/c he/she sure is'nt going to offer this information up to you.

 

[bmac]

I have an agreed value policy that used the retail value when new. The insurance company hasn't changed the coverage yet, I'll have to check it when I get my renewal in April.

 

[JimT]

Yacht policies insure on an actual cash value basis which is fair market value. You should get the policy limit in the event of a total loss and the cost to repair for a partial loss. There are no "replacement cost" yacht policies where you get a brand new boat to replace your old one if its destroyed.

 

[comsnark]

wait a second. . . .what is the meaning of "agreed value" if it isn't the "agreed value"?

So if I want to insure the boat for a different amount, I need to get a survey, but if THEY want to pay a different amount. . they don't need a survey? This makes no sense.

 

[JimT]

wait a second. . . .what is the meaning of "agreed value" if it isn't the "agreed value"?

So if I want to insure the boat for a different amount, I need to get a survey, but if THEY want to pay a different amount. . they don't need a survey? This makes no sense.

On your declarations page there should be a "Hull Value" listed. This is the "agreed value" in the event of a total loss. When setting the Hull Value start with what you paid for the boat and then lower the value on renewal each year to reflect what it would cost to replace the boat with a similarly equiped boat. If the insurer allows to you maintain the original purchase price as the Hull Value for several years you may be overinsuring the boat but in the event of a total loss you would still get paid the Hull Value.

 

[ChuckW]

Thanks for all the responses everyone! What I thought, not much science to it at all.

So...
1.) I have an "Agreed Value" policy, but they changed the value, how's that "agreed"? Now I have to go haggle.
2.) Like comsnark asks, if it's "agreed value" how can they pay out less if I suffer full loss?
3.) How do you peg/derive your agreed value? Market value plus some factor?

This is sounding more like a crap shoot out there then I ever imagined...

Thanks,

 

[tobnpr]

It's still called "Agreed Value"
Three types of forms:
Replacement Cost
ACV (Actual Cash Value)
Agreed Value

It gets rather technical and ambiguous. "Replacement Cost" carries a co-insurance requirement. Meaning, you must insure the property to a minimum percentage (often around 80%) of it's actual value- or you will be paid a reduced amount in the event of a claim. Say you have a boat that has a fair market value (whatever the hell that is these days) of $100K, but you claim it's value at $60K in an attempt to save some premium dollars (they're all based in $XX/ per $1,000 in coverage). If you have a claim you're going to get a reduced amount because you failed to insure the property to it's value.

Replacement cost can work on new or nearly new vessels- but there's no reason to leave anything open to interpretation in the event of a total loss, IMO. With an Agreed Value form, the policy limit is paid-- period, end of story...

Chuck:

They changed the limit based upon the boat being older, and probably market conditions, as well.
You don't have to "agree" to the "Agreed Value" amount...but they can simply say that's all the coverage they're willing to offer.
Discuss it with the Underwriting Dept. of your insurance carrier. If you've made substantial upgrades, or can provide a current survey saying otherwise, they may "agree"...

 

[douglee25]

If you finance your boat, some banks may require agreed value policies so they are fully covered in the event of a loss.

If your vessel is financed, you'd be stupid not to go with an agreed value policy anyway. Otherwise, potentially you'd be responsible to pay the difference between what the insurance company pays out and your remaining loan amount if you went with a replcaement cost/acutal cash value policy.

Doug

 

[highslice]

As an aside, go find a broker instead of an agent. An agent's fiduciary responsibility is to their insurance company. A broker's fiduciary responibility is to you. In my experience, you get a lot more straight answers from a broker.