Survey Value

[ThirdHatt]

The recent post titled "Insurance Renewal Survey" reminded me of a concern that I have about the relationship between survey value and insurable value. Rather than derail that thread I decided to post a new thread and see what you guys think.

Boat sale prices are down considerably as we all know but there have been a few that have sold here and there significantly lower than the recent/current comps due to particularly distressed situations. One of my concerns as a buyer in this market is when a buyer has managed to secure a contract price that is significantly under current market value, will a surveyor appraise the boat according to the comps in current market conditions or will he take under consideration the actual selling price of that particular boat and appraise the boat well under what recent comps have suggested. Apparently surveyors do not like to appraise a boat significantly above a selling price because of the remote possibility of insurance fraud. How widespread is this with surveyors? Just because a buyer strikes an incredible deal and gets a seller to agree to sell his boat well below market value, the buyer should not be penalized with a low appraisal just because of past insurance frauds.

I understand that surveyors have to take into account many different factors in determining a value, but IMHO a fair market valuation should have nothing to do with what the buyer is paying for the boat. Brokers have told me that often some time during the sea trial surveyors will ask the broker what the sales price is and miraculously the survey value will usually come in slightly above that. I see no reason why the surveyor would need to know the actual selling price, but maybe the asking price to give him an idea. The buyer might suggest what he thinks the value should be (within reason of course), and hopefully the surveyor can come to a value that is close to that amount with his own research and findings.

Obviously insurance companies would be concerned about survey appraisals that are significantly above actual sales prices for the fear of potential fraud. Often one of the questions asked when applying for boat insurance these days is "What is the sales price?" even though they are already requiring a full survey. I think that the sales price is irrelevant if they are selling an agreed value insurance policy. They have a professional survey report stating what it is worth. The underwriters should sell that policy based on that, not the quality of the deal that the buyer was able to put together.

I guess this type of sale can put surveyors in a somewhat uncomfortable position but there has to be some sort of a balance. A buyer needs full protection for his investment which is what the insurance is purchased for. He may have to replace the vessel in the event of a total loss and chances are he may not be able to recreate such an incredible deal. He should be insured for fair market value so that he can replace his boat with a comparable one.

Comments, thoughts, suggestions?

 

[Brian Degulis]

The surveyor should not know or care what your buying the boat for. Many insurance companies like Boat US will not insure a boat for more than the selling price. I had this dicussion with boat US. I boat a boat on a repo well below it's value they would only offer insurance for what I paid for it. At some point during the discusion (argument) I asked them what if the boat was given to me for free would you only be willing to insure it for 0. They sid it's they're policy and that's it. Zurich did not have this policy they went by survey value I insured with them.


Brian

 

[ThirdHatt]

The surveyor should not know or care what your buying the boat for. Many insurance companies like Boat US will not insure a boat for more than the selling price. I had this dicussion with boat US. I boat a boat on a repo well below it's value they would only offer insurance for what I paid for it. At some point during the discusion (argument) I asked them what if the boat was given to me for free would you only be willing to insure it for 0. They sid it's they're policy and that's it. Zurich did not have this policy they went by survey value I insured with them.


Brian

Thanks Brian. Interestingly enough, Boat US is who I already have a quote from and although they did ask what the sales price was during the application, I had not negotiated the actual contract price yet and I was just inquiring to see what insurance was going to cost so we used the ask price.

Now that I have that quote in writing it seems to me that I could get the coverage bound just by sending them the money and a copy of the survey, but who knows. I'll surely get other quotes but this is one I already have and it's not too bad at 1.7% per $1k of coverage vs. the 2.2%/$1k coverage I was paying on the old boat for a lesser valued policy.

 

[SeaEric]

The buyer or boat owner has hired the surveyor to represent HIS interests, not an insurance company's interest. The surveyor, therefore, works for the buyer (boat owner). The surveyor should protect the interests of his client, who is paying him.

As a broker, I generally engage the surveyor in a "conversation" about value in my customer's behalf. Its a good idea for the surveyor to have a idea of where he's headed, and usually the customer already has it covered. I offer sales comps if the surveyor needs them. I have almost never had an issue arise with a survey value that didn't meet the needs as intended.

 

[redneck joe]

could you work in a 'rebate' into the sales price? Pay $100K but have $25K rebate from the seller at closing so you only 'paid' $75? but show insurers you paid $100?

 

[Brian Degulis]

Thanks Brian. Interestingly enough, Boat US is who I already have a quote from and although they did ask what the sales price was during the application, I had not negotiated the actual contract price yet and I was just inquiring to see what insurance was going to cost so we used the ask price.

Now that I have that quote in writing it seems to me that I could get the coverage bound just by sending them the money and a copy of the survey, but who knows. I'll surely get other quotes but this is one I already have and it's not too bad at 1.7% per $1k of coverage vs. the 2.2%/$1k coverage I was paying on the old boat for a lesser valued policy.

Yeah that should do it. Boat US has been making lots of sensible changes lately maybe this is one of them. I like the company I have them now because they cut the rate in half since the last time I got a quote from them. They're Named Storm Deductible is higher in FL but they pay they're claims.

Brian

 

[ThirdHatt]

It sounds like there is no reason for me to be concerned.

Thanks guys!

 

[saltshaker]

When I bought my Hatt the surveyor never asked what I was paying for it. It was a private sale with no broker or bank involved so he had no way of checking for the asking price. The boat surveyed well and the value came in where I expected it to. I bought the boat way under market and was looking to insure the boat for a bit more than I paid for it but not too much more. My agent thought the value I requested was too low and would not represent a good replacement price. She convinced me to insure for 50K more than I requested, which was still below the surveyed value, and the premium was only slightly higher than my original quote.

BTW, what did you buy?