Agreed Value vs Market Value Yacht Policy UK

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 is a total loss — whether by sinking, fire, or a constructive total loss where repair costs exceed the agreed figure — the underwriter pays that agreed sum without further argument about depreciation or current market conditions. The Institute Yacht Clauses, which underpin most UK-market hull policies, accommodate this basis explicitly, and it is the dominant choice for privately owned and charter-operated yachts in the London company market.

The practical benefit is certainty. You know before you leave the marina what a worst-case settlement looks like. For a yacht financed under a marine mortgage, the mortgagee bank will almost always insist on agreed value cover because it protects their security interest. If you are operating under a bareboat or crewed charter contract, your charterer's lender or flag-state authority may impose the same requirement.

Agreed value does not mean you can insure at any figure you choose. Underwriters will ask for a current survey, a recent purchase invoice, or a professional valuation — particularly on vessels above a certain hull value or on older GRP and timber construction. If your declared value is materially above what the market evidence supports, the underwriter may apply a co-insurance penalty at claims stage, or decline to renew at that figure. Keep your valuation current: a yacht bought in a buoyant brokerage market three years ago may now be worth less, and over-insuring creates its own complications.

For yachts on Mediterranean or Caribbean itineraries, agreed value also simplifies general average adjustments. Under the York-Antwerp Rules, your contribution to a general average act is calculated against the insured value of your vessel. An agreed value policy removes any dispute about what that figure should be at the time of the casualty.

What Market Value Cover Means — and Where It Falls Short

A market value policy settles a total loss at whatever the vessel is worth on the open market at the date of the casualty, not at the figure shown in your schedule. The underwriter will commission their own valuation, reference recent comparable sales, and apply depreciation. For a yacht that has held or increased its value — classic wooden vessels, certain performance sailing yachts, or a well-maintained motor yacht in a rising market — this can occasionally work in your favour. In most cases, particularly for production GRP cruising yachts more than five years old, it works against you.

The gap between what you paid and what an adjuster values the vessel at can be substantial. Fitting out costs, electronics upgrades, custom sails, and refit expenditure rarely appear in a market valuation. If you have spent materially improving the yacht since purchase, that investment is effectively uninsured under a market value basis unless you have specifically scheduled those items and agreed their value separately.

Market value policies are more common on older or lower-value vessels where underwriters are reluctant to agree a fixed sum, and on vessels that have not had a recent out-of-water survey. If you are being offered market value terms on a yacht you consider well-maintained and accurately valued, it is worth asking your broker to push for agreed value — often the difference in premium is modest relative to the certainty it buys.

How the Choice Affects Constructive Total Loss and Partial Claims

A constructive total loss (CTL) is declared when the cost of repair, plus the cost of recovering the vessel to a port of repair, exceeds the insured value. Under an agreed value policy, that threshold is your agreed sum. Under a market value policy, the threshold is whatever the adjuster determines the vessel was worth — which may be lower than your agreed figure, making a CTL easier to trigger but settling for less than you expected.

For partial losses — grounding damage, collision, storm damage — the valuation basis matters less directly, but it still affects the sue-and-labour provisions in your policy. Sue-and-labour costs (reasonable expenses you incur to prevent or minimise a loss) are recoverable in proportion to the insured value. If your market value settlement is lower than your agreed value would have been, your recoverable sue-and-labour costs are proportionally reduced.

The Inchmaree clause, incorporated into most Institute Yacht Clauses, extends hull cover to losses caused by the negligence of crew, bursting of boilers, breakage of shafts, and latent defects in machinery. This clause operates regardless of valuation basis, but the amount recoverable on any Inchmaree claim is still capped at the insured value — another reason to ensure that figure is accurate and defensible.

Charter Operations, P&I, and Why Valuation Basis Matters Beyond the Hull

If you operate your yacht commercially — whether under a bareboat charter, crewed charter, or as part of a charter fleet — your hull valuation basis has knock-on effects across your entire insurance programme. Most charter contracts require you to carry hull cover at not less than the full replacement or agreed market value of the vessel, and some flag-state or port-state authorities in the Mediterranean and Caribbean will ask to see your certificate of insurance before granting a commercial endorsement.

Your P&I cover — which responds to third-party bodily injury, wreck removal, and pollution liability — is typically placed separately from hull, but underwriters will look at your hull valuation when assessing the overall risk. Under the Convention on Limitation of Liability for Maritime Claims (LLMC), your right to limit liability is calculated by reference to the vessel's tonnage, not its insured value, but a well-structured programme with consistent valuations across hull and P&I makes the claims process significantly cleaner if you face a combined hull and liability event.

For yachts carrying paying crew under MLC 2006, your crew cover obligations are fixed by the convention regardless of hull valuation — but again, a coherent insurance programme with an agreed hull value makes it easier to demonstrate to port-state control that your financial security arrangements are in order. If you are cruising in the Gulf and transiting areas listed under the Joint War Committee (JWC) Hull War, Strikes, Terrorism and Related Perils Listed Areas — which currently include parts of the Red Sea, Bab-el-Mandeb, and Gulf of Aden — your war risk cover will be written on a separate basis, and the agreed value on your hull policy will be the reference point for that additional layer.

Charter operators should also consider how agreed value interacts with loss-of-hire cover. If your yacht is out of commission following a covered loss, loss-of-hire policies typically pay a daily indemnity for the period of repair. The indemnity period and daily rate are agreed at inception — but the trigger is a covered hull loss, and the hull policy's valuation basis determines whether a CTL is declared or a repair is attempted. An agreed value that accurately reflects your vessel's worth makes it less likely that a borderline CTL decision goes against your commercial interests.

What to Bring to Your Broker at Renewal or Inception

Whether you are placing new cover or approaching renewal, the quality of the information you provide directly affects the terms you are offered. Underwriters in the specialist market price on the basis of what they know — gaps in the submission invite conservative assumptions that widen deductibles or restrict trading areas.

For an agreed value hull policy, your broker will typically need the following from you before approaching underwriters:

• Current out-of-water survey (most underwriters require one within the last three to five years, depending on vessel age and construction)
• Purchase invoice or professional broker's valuation if the survey predates a significant market movement
• Full specification: LOA, beam, year of build, construction material, engine hours, recent refit work
• Intended cruising area for the policy period, including any planned passages through JWC-listed war risk zones
• Charter status: private use only, occasional charter, or full commercial charter operation
• Crew details: qualifications, ENG-1 medicals if applicable, and whether you carry paid crew under MLC 2006
• Claims history for the past five years across all marine policies
• Existing finance or mortgage on the vessel and mortgagee's requirements

What to Expect on Renewal and When to Review Your Valuation

Yacht values are not static. The brokerage market for sailing yachts and motor yachts has moved materially in both directions over recent years, and an agreed value set three or four years ago may no longer reflect what your vessel would actually fetch — or cost to replace. If your agreed value has drifted below market, you are effectively under-insured; if it has drifted above, you may be paying premium on a figure that an underwriter would challenge at claims stage.

At each renewal, ask your broker to confirm whether the agreed value still aligns with current market evidence. If you have carried out a significant refit, added new electronics, or replaced sails and running rigging, those improvements should be reflected in an updated valuation and declared to underwriters. Failing to disclose material improvements is not just a valuation issue — it can affect your duty of fair presentation under the Insurance Act 2015, which governs UK marine policies and places a positive obligation on you to disclose all material facts.

Deductibles also bear scrutiny at renewal. On agreed value policies, deductibles are typically expressed as a fixed sum or as a percentage of the agreed value. If your agreed value has increased, a percentage deductible increases with it — something that is easy to overlook when reviewing renewal terms. Your broker should be asking the underwriter whether the deductible structure still makes sense given your claims history and cruising programme, and whether any lay-up credits are available if the vessel will be out of commission for part of the policy year.

If you are switching from market value to agreed value cover — perhaps because you have just completed a major refit, taken on a charter contract, or arranged marine finance — timing matters. The transition should coincide with a fresh survey so that the agreed figure is immediately defensible. Attempting to agree a value without supporting survey evidence will either be declined or accepted with a wide deductible that undermines the certainty you are trying to achieve.

Frequently asked questions

Do I need an out-of-water survey to get agreed value cover in the UK?

For most vessels, yes. Specialist underwriters will want a current condition-and-valuation survey before they commit to an agreed figure, particularly on vessels over a certain age or above a given hull value. The survey gives both sides a defensible basis for the agreed sum and protects you if the figure is ever challenged at claims stage. Some underwriters will accept a recent purchase invoice for a newer vessel, but a survey is the cleanest route to agreed value terms.

What happens if my yacht is declared a constructive total loss and I have a market value policy?

The underwriter will commission an independent valuation of the vessel at the date of the casualty. If that figure is lower than you expected — which is common on older production yachts — your settlement will reflect the lower amount, not what you paid for the boat or what you have spent on it since. This is the core risk of market value cover, and it is why most owners with vessels of meaningful value push for agreed value terms.

My charter contract requires cover at full replacement value. Does agreed value satisfy that?

It depends on how the contract defines 'full replacement value'. Agreed value satisfies the requirement if the agreed sum is set at a level that genuinely reflects replacement cost. If your agreed value is materially below what it would cost to replace the vessel today — particularly relevant for custom builds or vessels in a rising market — there may still be a gap. Review the wording of your charter contract alongside your policy schedule and ask your broker to confirm alignment before you sign.

How long does it take to bind agreed value hull cover?

For a straightforward private yacht with a current survey and a clean claims history, cover can typically be bound within a few working days of your broker submitting a complete presentation to underwriters. More complex risks — commercial charter operations, vessels trading in JWC war risk areas, or yachts with a recent claims history — will take longer, and war risk cover for Gulf or Red Sea passages may need to be arranged separately on shorter notice. Do not leave renewal to the last week of your policy period.

What do you need from me to get terms?

At minimum: your current certificate of insurance or policy schedule, the most recent survey report, vessel specification (LOA, build year, construction, engine details), intended cruising area for the coming year, charter status, crew qualifications, and five years of claims history. If you have a marine mortgage, include the mortgagee's insurance requirements. The more complete your submission, the sharper the terms we can obtain on your behalf.

Can I switch from market value to agreed value mid-policy?

In principle, yes — but underwriters will treat it as a material change requiring a fresh submission and, almost certainly, a current survey. A mid-term switch also resets the basis of cover from the endorsement date, not the original inception date, which matters if you have an open claim or a recent incident that has not yet been formally closed. It is cleaner to make the switch at renewal with a fresh survey in hand.