Boat Insurance Explained: Agreed Value vs. Actual Cash Value

Boat Insurance Explained: Agreed Value vs. Actual Cash Value

Boat insurance is easy to put off until you need it. When you do need it, the details matter a lot, especially how a total loss would be paid. This guide explains the main types of coverage, the difference between agreed value and actual cash value, and the fine print worth checking before you buy. It draws mainly on consumer guides published by two state insurance regulators, Maryland and Michigan.

Do you have to insure your boat?

It depends on where you live and how you finance and store the boat. Maryland's Insurance Administration, for example, says Maryland has no law requiring boat insurance, though it still recommends coverage. Even where the law doesn't require it:

Watch out for "force-placed" insurance. Maryland's guide warns that if you let required coverage lapse, a lender can buy a policy that protects only the lender and add the premium to your loan payment. In a total loss, the lender is paid what's still owed on the loan, but you get nothing for your equity. You avoid this by keeping your own policy in force with the lender named on it.

Three ways to get coverage

According to the Maryland guide, you can usually insure a boat in one of three ways:

  1. Your homeowners policy. It may give some coverage for small boats, such as sailboats under 26 feet or powerboats with outboards under 25 horsepower. That coverage can be very limited; the Maryland guide gives the example of property damage capped at $1,000 for the boat, trailer, equipment and motor combined.
  2. A watercraft endorsement added to your homeowners policy, for an extra premium. It can cover larger boats than the base policy.
  3. A separate boat owners policy. These tend to give broader coverage for the boat, its equipment and the trailer.

Michigan's Department of Insurance and Financial Services adds that a homeowners policy may only cover a boat in specified waterways. It also notes that a boat claim on your homeowners policy could affect that policy's premium, which is one reason to consider a separate boat policy.

What a boat owners policy typically covers

Policies differ, but the Maryland guide describes common parts:

"Boat equipment" varies by policy. Maryland lists items often included, such as anchors, batteries, bilge pumps, life jackets, depth finders, radios and covers, but your policy may not include all of them. Read the definition.

Common exclusions listed by Maryland include:

Agreed value vs. actual cash value

This is the big decision. Both state guides describe the options the same way.

Actual cash value (ACV)

ACV pays what it would cost to replace the boat, minus depreciation. Michigan notes ACV policies are generally less expensive, but because depreciation is taken off, a total-loss payout on an older boat can be well below what you paid or owe.

Agreed value (sometimes "stated value")

With agreed value, you and the insurer agree on the boat's value when the policy is written. If the boat is destroyed by a covered loss, you receive that agreed amount. Michigan notes these policies tend to cost more, but depreciation isn't deducted when a total loss is settled. Insurers may ask for a survey or other proof of value before agreeing on a figure. See our Marine Surveys guide.

Replacement cost

Some policies offer replacement cost value. Maryland describes it as paying to replace the boat with one of like kind and quality.

Which is right for you?

Several major insurers in our data offer both approaches. BoatUS (underwritten by GEICO Marine) offers "Agreed Hull Value" on most boat types other than PWC, or ACV. Progressive, Allstate and Travelers list agreed value or ACV options. Chubb's and Hagerty's programs are built around agreed value.

As Maryland's guide puts it, the method matters because different methods can pay you different amounts for the same damage, and your policy will say which method applies. Check before you have a claim.

Fine print worth checking

What affects your premium

The Maryland guide lists common rating factors:

Ways to lower your premium suggested in the same guide:

If you can't find coverage

Older or unusual boats, poor records or high-risk waters can make coverage hard to find. Maryland explains that you may then need a surplus lines insurer through a specialized broker. In Maryland, you generally must first be turned down by three authorized insurers. Surplus lines carriers aren't regulated the same way, so check the broker's license with your state insurance department first.

Building insurance into your budget

Insurance premiums vary too much by boat, person and location for us to show a typical figure. We don't publish an "average premium" because we haven't found an official source for one. Get real quotes and enter your premium in the True Cost tool to see your full annual cost. Our State Rules tool covers each state's registration and tax rules, which are separate from insurance.

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