Boats vary so much in condition that the valuation will be generally down to you. So is it important to get it right? And what are the consequences of over-estimating?
How to value your boat
Whilst an insurer or intermediary may have a rough idea of what the value of a particular yacht ought to be, because used boats can vary so much in condition, they will not be able to put an accurate value on it. So the valuation – and the amount for which you insure your boat – will generally be down to you to decide, though if your valuation is very far away from what the insurers think it should be, they may ask for a professional valuation, or they may ask you to support your valuation by producing receipts for work carried out, or equipment added.
Is it important to get the valuation right? As with the answer to many questions, ‘it depends’!
There are really two issues to look at here. The first is what the insurance policy will pay out if your boat is a total loss. Let’s say your valuation is on the generous side. If you have an Agreed Fixed Value policy, or the policy says that in the event of a total loss the insurers will pay you the whole sum insured, then that is exactly what you will get – whether or not the valuation was ‘correct’ (provided you did not deliberately misrepresent the value in the proposal form and have not, for example, exaggerated the purchase price). If your policy isn’t an Agreed Fixed Value policy or says that the settlement will be on the ‘market value at the time of loss’ you may find the insurers try to negotiate settlement to a lower figure than the sum insured.
The second issue to look at is how claims for partial damage are settled. This time, let’s suppose you have a policy that says it will pay for partial damage at the actual cost of repair, then you shouldn’t have a problem. If however, you don’t have that luxury, you may find the insurers using the argument that because you have not insured the full value of the boat, they should not pay the full value of your claim. This is known as ‘average’ and it’s worth watching out for the use of ‘average’ in any of the wording relating to the settlement of claims.
One final point on valuations; it is a general principle of insurance that you should not benefit financially from an insurance policy. The definition of indemnity is to put you in the same position after an accident as you were in before the accident. And as far as possible that is what should happen. But you should not be in a better position, having a more valuable asset.
However, it is possible to insure your boat for more than its value, particularly in the early years, so that you insure for what it would cost you to replace it with a brand new boat of the same make and model. If this is something that is important to you, it’s worth asking insurers whether they can offer this.