Agreed Value vs Market Value Yacht Insurance

What Agreed Value Actually Means for Your Hull Cover

Under an agreed value policy, you and the underwriter fix the insured sum at inception. If your yacht suffers a constructive total loss or actual total loss, the underwriter pays that agreed figure — no deduction for depreciation, no argument about what the market would have fetched on the day of loss. The sum is settled at policy commencement, not at the date of the casualty.

This matters enormously for newer vessels, custom builds, and extensively refitted yachts where the replacement cost or the owner's financial exposure does not track the second-hand market. If you've spent heavily on a refit — new engines, carbon rig, updated electronics — a market value policy may never reflect that investment, because the open market for second-hand yachts rarely prices individual improvements accurately.

Agreed value is the standard expectation in the specialist yacht market for vessels above a certain size and complexity. When your broker submits your risk to specialist underwriters, the agreed value is supported by a current marine survey. Most underwriters require a survey no older than three to five years, and some will require a fresh one if the vessel has changed hands or undergone significant work since the last survey was completed. Your broker should be asking the underwriter what survey standard they require — IIMS or equivalent — before you bind.

What Market Value Means — and Where It Leaves You at Total Loss

A market value policy pays what the vessel was worth on the open market immediately before the loss occurred. That figure is determined after the event, typically by a marine valuer or average adjuster appointed by the underwriter. You have limited control over that assessment, and it will reflect depreciation, the state of the second-hand market at the time, and the vessel's condition as evidenced by the most recent survey.

For older production yachts where values are stable and well-documented, market value cover can be appropriate and is often less expensive to place. The risk is that your yacht's market value drifts below your outstanding finance, your refit investment, or the cost of a comparable replacement — and you discover that gap only when you're making a claim.

If you're operating under a bareboat or crewed charter contract, your charter agreement almost certainly specifies a minimum insured value. A market value policy that pays out below that contractual minimum creates a direct liability for you as the vessel owner. Your broker should review your charter contract wording before recommending a valuation basis, not after you've already bound cover.

How Valuation Basis Interacts with Partial Loss, General Average and Sue-and-Labour

Total loss is the clearest scenario, but valuation basis also affects how partial losses are settled. Under an agreed value policy, repair costs are typically settled against the agreed sum insured without the underwriter arguing that the vessel's market value at the time of loss was lower than the agreed figure. This matters when repair costs are substantial relative to the vessel's age.

General average — the principle under York-Antwerp Rules whereby all parties to a maritime adventure share extraordinary losses incurred for the common safety — is declared by the shipowner or master. Your contribution to a general average fund, and any security you're required to post, will be calculated by reference to your vessel's value. If your insured value is understated relative to actual value, your general average contribution may exceed what your policy covers, leaving you to fund the shortfall personally.

Sue-and-labour obligations under your Institute Hull Clauses require you to take reasonable steps to avert or minimise a loss, and your policy reimburses those costs. The reimbursement is proportionate to the insured value relative to the vessel's actual value. If you've underinsured — whether on an agreed or market value basis — the average condition (underinsurance clause) can reduce every claim settlement proportionately. Agreed value policies typically remove this risk for total loss, but partial loss settlements on underinsured agreed value policies can still be subject to averaging. Your broker should confirm how your specific wording handles this.

Charter Operations: Why Valuation Basis Is a Commercial Decision, Not Just an Insurance One

If your yacht generates charter income, the insured value underpins more than just hull cover. Your P&I cover — which responds to third-party liability, crew injury claims under MLC 2006, and passenger liability — is typically written alongside your hull policy. Underwriters assess the overall risk package together, and a credible, survey-supported agreed value signals a well-maintained, professionally operated vessel.

Charter operators in the Mediterranean, Caribbean, and Gulf should also consider that their flag state, port state, and charter management company may each impose minimum insured value requirements. Vessels flagged under a red ensign jurisdiction, operating under MCA coding, will face scrutiny of their insurance certificate at port state control inspections. A market value policy that pays out below the contractual minimum creates a compliance gap as well as a financial one.

When you're placing or renewing a charter yacht policy, bring your current charter contract, your most recent marine survey, your trading area declaration, and your crew list with MLC 2006 documentation to your broker. These documents allow underwriters to assess the risk accurately and support the agreed value you're proposing. Gaps in documentation push underwriters toward market value terms or higher deductibles.

• Current marine survey (IIMS standard or equivalent, dated within underwriter's required window)
• Charter contract specifying minimum insured value and liability limits
• Trading area declaration covering all planned cruising grounds including any war risk areas (Hormuz, Bab-el-Mandeb, Red Sea approaches)
• Crew list with qualifications, ENG-1 medical certificates, and MLC 2006 employment agreements
• Details of any refit, modification, or change of use since last survey

Renewal: When to Revisit Your Valuation Basis

Yacht values are not static. The second-hand market for quality bluewater cruisers and charter vessels has moved materially in recent years, and an agreed value set three or four years ago may now be either above or below current replacement cost. At renewal, your broker should be asking the underwriter whether the agreed value remains acceptable without a fresh survey, and whether the market has moved in a direction that affects your cover.

If your agreed value is now above what the market would support, some underwriters will accept a desktop revaluation or a broker's market appraisal. If it's below replacement cost — particularly after a refit or in a rising market — you should request an uplift and support it with survey evidence. Binding a renewal without reviewing the agreed value is one of the most common and most expensive oversights in yacht insurance.

For vessels with outstanding marine finance, your lender will typically require the insured value to meet or exceed the outstanding loan balance, with the lender noted as loss payee on the policy. If the agreed value has drifted below the loan balance, you may be in breach of your finance agreement as well as underinsured. Check both positions before you sign the renewal slip.

Agreed Value vs Market Value: Which Basis Suits Your Situation

Agreed value is generally the right choice for: newer vessels where depreciation hasn't yet aligned market value with replacement cost; custom or semi-custom builds where the market has no direct comparator; heavily refitted yachts where the investment exceeds what the second-hand market would reflect; and charter vessels where contractual minimum values must be met.

Market value may be appropriate for: older production yachts with well-established second-hand values and no significant recent investment; vessels where the owner's financial exposure is limited and the priority is minimising premium outlay; and situations where a current survey is unavailable and the underwriter will not accept an agreed value without one.

The decision is not purely about premium. It's about what you can afford to lose if the vessel is written off, what your charter contract requires, and what your lender demands. Your broker's job is to present both options clearly, with the implications of each, so you make an informed choice before you bind — not after you've filed a claim.

Frequently asked questions

Do I need a new survey to get agreed value cover?

Most specialist underwriters require a current marine survey to support an agreed value, typically dated within three to five years. If your vessel has changed hands, undergone significant refit, or if the last survey is outside that window, a fresh survey will almost certainly be required before underwriters will accept the agreed value you're proposing. We can advise on which surveyors are accepted by the underwriters we work with.

What happens if my yacht is declared a total loss under a market value policy?

The underwriter appoints a marine valuer to assess what your vessel was worth on the open market immediately before the loss. That figure — not your purchase price, not your refit investment, not the sum you insured — is what the policy pays. If the market value at the time of loss is below your outstanding finance or your charter contract's minimum, you bear the shortfall personally. This is the core reason most charter operators and financed vessel owners should be on agreed value terms.

My charter contract specifies a minimum insured value. Does my current policy meet it?

Not necessarily. Charter management companies and bareboat operators routinely set minimum insured values in their contracts, and those figures are not automatically reflected in your hull policy. Send us your charter contract alongside your current policy schedule and we'll check whether the insured value, the liability limits, and the P&I cover all meet the contractual requirements. Gaps here create personal liability for you as the vessel owner.

How does valuation basis affect my general average contribution?

General average is apportioned by reference to the salved values of all interests in the adventure — vessel, freight, and cargo. Your hull underwriter covers your vessel's contribution based on the insured value. If your insured value is materially below the vessel's actual salved value, the average adjuster may assess your contribution at a higher figure than your policy covers, leaving you to fund the difference. Agreed value cover, set at a realistic figure and supported by a current survey, removes most of this risk.

What do you need from me to get a quote on agreed value terms?

To approach specialist underwriters on agreed value terms, we need: your current marine survey (IIMS standard or equivalent); the vessel's full specification including any recent modifications or refit work; your intended trading area for the policy period, including any passages through designated war risk zones; your crew details and qualifications; and your charter contract if the vessel is commercially operated. The more complete the submission, the stronger the position we can negotiate on your behalf.

Can I switch from market value to agreed value at renewal?

Yes, and renewal is the natural point to make that change. You'll need to commission or provide a current survey if one isn't already in place. We'll present the agreed value to underwriters alongside the survey and any supporting documentation, and negotiate terms accordingly. If your vessel has appreciated or been significantly refitted since your last renewal, switching to agreed value at renewal is often the most important coverage improvement you can make.