Understanding the Agreed Value vs. Market Value of Vessels

Hear more from our specialist Geo Marine team below, who are offering guidance and tips as part of our dedicated series of articles created especially for brokers and your clients. This time, we asked the team to provide some top tips on the differences between agreed versus market value.

When it comes to insuring a vessel, one of the most important decisions to make is: how are we valuing it? That sets the tone for how claims get paid, especially in the event of a total loss.

Here’s the simple breakdown:

Agreed value (a.k.a. valued policy)

This is the pre-agreed price tag of the vessel, set at the start of the policy. It stays fixed for the policy period, regardless of market conditions.

Pros:

• Certainty: In a total loss, the payout is the agreed amount, so there’s no arguing over what the vessel was worth at the time.
• Speed: Claims are settled slightly faster, so there’s no need for post-loss valuation debates.
• Popular for older vessels, where market values can be unreliable or volatile.

Cons:

• Might not reflect real-time value if the vessel's value drops, the insured may get “more” than it’s worth.
• Can be over-insured if not updated regularly, which doesn’t mean a higher payout - just higher premiums.
• Regular valuation survey requirements for insurers.
  
  

Market value (a.k.a. unvalued policy)

Here, the vessel’s value is assessed at the time of loss. The payout is based on its actual market worth right before the incident.

Pros:

• Accurate at the time of loss: Reflects depreciation, market shifts, or wear and tear.
• Cheaper premiums: Usually lower than agreed value, especially in declining markets.

Cons:

• Uncertainty: Post-loss negotiations can delay payouts.
• Valuation disputes: Owners and insurers often disagree on what the vessel’s really worth.