The Sum Insured - Getting it Right

One area where most pleasure craft insurances differ from other classes of insurance is that it is a valued policy. There are insurances around that are not "valued" but are "market value". In these the amount payable in the event of a total loss is the current market value and not the agreed sum insured on the policy.

Haven Knox-Johnston only issue "agreed value" policies.

Note - this does not apply to claims paid on outboard motors, which will be based on the current market value.

An agreed value insurance means that, if there is a total loss, the sum insured is the amount that will be paid irrespective of the actual value at the time of the loss.

It also means that a recoverable claim for damage, that is not a total or constructive total loss, will be payable in full whatever the total sum insured or value at the time of the loss.

As a result it is very important that the correct sum insured is arrived at the start of the insurance. The value should represent what it would cost to replace the craft with a craft of similar age, type and condition.

Purchase Price

The simplest, and most reasonable, way to estimate this if the boat is a recent purchase is to use the purchase price.

Market Value

This can be different from the purchase price, particularly where a craft has been in the same ownership for some time. It is always wise to check occasionally that the insured value represents the current market value.

Additional Equipment

While the sum insured should be increased to cover these items of gear etc., it is wise to separately specify and individually value such items as outboard motors (see note above), dinghies and trailers.

Valuations

Where it is felt that the agreed sum insured is inadequate, or an increase is felt necessary, insurers may ask for justification of the increase by way of a valuation.

This can be obtained as part of a survey or, if no survey is being done, from a Yacht Broker. This valuation will represent what the surveyor or broker feels is the current market value of the craft.

One further point. It is stated above that the vessel should be insured for its current market value. If the craft is put up for sale and the suggested asking price from the Broker differs from the current sum insured, the sum insured under the policy should be amended to reflect the, now known, market value. However, it should be borne in mind that the asking price is not necessarily the market value in a buyers' market. Insurers may not simply inflate a sum insured just because the craft is on the market at that price.

The above is for information purposes only. It is not intended to define legal terms nor is it intended to affect the interpretation of any policy we may issue.

If you have any questions concerning your insurance, there is no replacement for having your individual questions answered individually by your insurance broker or insurer.