Guide
Agreed value against actual cash value
Updated
This is the most consequential clause in a marine policy and the one least likely to be read, because its effect is invisible until the worst day.
What the two mean
An agreed value policy pays the figure stated in the policy at a total loss. An actual cash value policy pays what the vessel was worth at the moment of loss, which is depreciated and argued.
The premium difference is usually modest. The settlement difference on an older vessel can be very large.
Why it is argued
Under actual cash value the insurer and the owner are valuing the same boat with opposite incentives, after it has been destroyed, using comparables neither can inspect.
Agreed value removes that argument entirely, which is most of what you are buying.
Keeping the agreed figure honest
An agreed value that is far above the vessel's worth invites scrutiny and can raise a moral hazard question; one far below leaves you short.
Review it when you refit or when the market moves, and be able to evidence it. A survey with a valuation is the usual evidence.
Ask at quotation, not renewal
Which basis applies should be established when comparing quotes, because two quotes on different bases are not comparable at all.
It is a one-line question and it is the single most useful thing to ask a marine broker.