Can someone explain to me an agreed value policy. If a boat is insured for let's say an agreed 30,000 for replacement under total loss, will this replacement hold true even though the actuall value of the boat is less? My buddy says no, I say yes because it is an "agreed" policy. what's the answers ?
You are talking about 3 separate policies.
Agreed Value: An agreement between you and the insurance company as to the value of your boat and equipment. In the event of a total loss they will pay the amount shown on the declaration page.
Actual cash value: In the event of a total loss the insurance company only has to pay the current value of your boat and equipment. It is just like your auto policy. I would strongly suggest not going with this kind of coverage
Replacement coverage: It is is diffacult to answer this because a lot of companies do it differently. Some companies will replace your boat new for old and some companies will replace your boat up tp the original purchase price. These policies are on mostly new boats.
I would recommend an Agreed value policy because you know right up front how a total loss will be handeled. In addition, most Agreed value policies will not take depreciation on partial losses. I hope this helps. Bob
But does "agreed value" also pay off your loan if you financed the boat for long term and have alot of unpaid interest?
The loan amount has nothing to do with it. You need to make sure you have enough in Agreed value to cover the amount of the loan. I have been trying to educate the members here on Marine insurance. I'm a marine speciality agent representing a number of insurance companies nationally. There are huge difference's between what we do and your standard property and casuality company. I have been able to help a lot of members here better understand there insurance needs. Feel free to give me a call if you need any help. Thank you Bob Luellen
I am sorry, but I feel loan amount has everything to do with it. What insurance company would agree to pay 10K - 20K more than what the boat cost new? Again, based on long term financing. I understand that cars and boats are different things, but car lenders will let folks carry over negative equity I don't see boat lenders do the same. Also, like you I am wanting to make sure everyone is educated on why or why not to finance a boat for more than 48-60 months. I am asking these questions because I do not know the answers. There is more to think about instead of just that monthly payment. It would be sad to loose your boat and not have enough insurance to pay the loan back so you could get a new one.
If you purchase a new boat or a used boat. I would recommend insuring it with Agreed value at the purchase price. If you have a claim you will by paid the amount shown on the declaration page. If you do this you will have what you need to pay the loan off. I hope this helps. Bob Luellen
Let me make sure I understand, you purchase a boat for $50k and finance it at 7.5% for 15 years and at the end if the term the loan ends up being $83k. I would need to get 'Agreed value' at $83k?
no sir, that's not the way it works, Agreed Value is at the time you purchase the Insurance, has nothing to do with the Interest you will be paying on with the Contract you have with the Bank. Ex: you need Insurance today and your boat is Valued at 20K and you agree with your Agent at the Insurance Co. will Agreed to Insure, has nothing to do with the Amount of money you Owe on it. even if you keep it till the Loan is Paid in Full, It will be at What you and the Insurance Co. Agreed on back when you purchased the Policy on the Value of the Boat. Now, this is the way my Insurance co. explained it to me. Bob, if this is wrong information on my part, feel free to correct me too.
The amount of interest is calculated in the begining of the loan and amortized over the term of the loan, If you had a total loss, for example, in the second year of the loan, you would not owe all the interest. If you kept the boat for the entire term of the loan, then you would owe that much interest. The point is to make sure you have an Agreed value policy to cover the amount owed on the boat. I hope this helps you to better understand. Thanks Bob Luellen
I think I see part of your question. Yes, on a trade in some dealers will let you finance more than the boat is worth (negative equity). If you get an agreed value policy, insure it for what you owe, since you really have no idea what the boat is actually "worth" anyway the way some of these dealers move numbers around to make a deal.
Without an agreed value policy, no, the insurance company will not care what you paid or that you are underwater on the boat, they'll pay you what they decide it is worth when the total loss happened. So yes, your tail is hanging out there for anything you owe more than they paid.
Your other question about the interest cost on a long term finance has been answered. Just because the paperwork shows what you would pay for the boat and interest if you waited until the end to pay it off does not mean you actually owe that much interest, you just owe however much you have paid when the loan is paid off. Your loan will always decrease over time, not increase.
Unless you got rooked by a crooked loan officer.
Boatless again but looking forward to Spring
Reply With Quote
