One of Queensland’s most respected marine insurance experts, Damian Pugh explains how recreational boat owners can avoid being caught in a common trap.
And it is by understanding the difference between Market Value and Agreed Value, in their insurance policies.
Market Value – most people have this type of policy. But boat owners are not aware that if you have insured your boat for $90,000 for every one of the past 5 years, the actual insurance payout figure may be only $65,000 if something dreadful happens to your vessel.
That’s because the insurer only pays you the current market value – $65,000 despite the fact you have been paying a premium for $90,000 – its original value.
How does this happen? Under some policies, the original value of $90,000 automatically defaults to market value after a period of time – typically, a couple of years.
Time and time again, policies are being taken out on Market Value and renewed on Market Value despite the insurer reminding clients to check the sum insured at each renewal.
If you double-check the amount that you will be paid out in a total boat loss situation, but believe your boat is worth much more, then you can do something about it.
Immediately get a formal valuation from a licensed authority, such as a marine dealer and submit that valuation for consideration when renewing your insurance. This has to be done before the accident, not after it.
An Agreed Value policy on the other hand is the agreed payout price whether it is new business or a renewal. In the event of a total loss under an Agreed Value policy, the sum insured – that is the Agreed Value – is paid out.
You get the full $90,000 less any excesses that might apply.
Again, that’s why you should lodge a new valuation from a recognised authority such as a boat broker or retailer, who can confirm the actual value of your vessel.
Many of the same people who later will lose tens of thousands of dollars, spend years telling their friends that their insurance policy is the best. It may well not be. You just have to read boating forums to see that.
As a fully independent broker not tied to any particular insurer, it’s my job to guide people about the right policy for them – specifically for them. A different policy might be better suited to one of their friends. It’s a case by case review that needs to be undertaken and it needs to consider issues such as market value versus agreed value. It costs you nothing.
Damian Pugh began his career as a traditional boat builder with Millkraft at Bulimba. He moved into marine insurance rising to become the Underwriting Manager for Club Marine before joining Nautilus Marine Insurance to head its Australian underwriting division. Damian then formed Helm Insurance Services specialising in marine insurance, to help boaties identify the best options and to avoid the pitfalls when it comes to insuring boats and marine-related businesses. He can be contacted on 0439 771 109.
The small print: Helm Insurance Services Pty Ltd – Authorised Representative No. – 1263254.
Corporate Authorised Representative of Insurance Aid General Brokers Partnership Pty Lt Ltd AFS Licence No: 239049