Agreed Value:
Noun
1. A term commonly used in insurance policies, referring to the predetermined and mutually agreed upon value of an insured item or property at the time the policy is issued.
2. The agreed value is typically determined through negotiation between the insured and the insurer, taking into consideration factors such as the item’s market value, condition, age, and any unique characteristics.
3. In the event of a covered loss or damage to the insured item, the agreed value serves as the maximum amount that the insurer will pay out to the policyholder, regardless of the actual current market value or replacement cost of the item.
4. Agreed value is often used for insuring valuable assets such as classic cars, antiques, artwork, or jewelry, where the market value may fluctuate significantly over time.
5. By establishing an agreed value, both the insured and the insurer have a clear understanding of the item’s worth, providing financial protection and peace of mind in case of a covered loss.
Agreed value is a term commonly used in insurance contracts to refer to the predetermined amount that will be paid by the insurer in the event of a covered loss or damage. Unlike actual cash value, which takes into account depreciation and market value, agreed value is a fixed sum agreed upon by both the insured and the insurer at the time the policy is issued. This agreed value is typically based on the current market value of the insured property or asset. By agreeing to an agreed value policy, the insured can ensure that they will receive a specific amount in the event of a covered loss, regardless of any depreciation or changes in market value. This can be particularly beneficial for high-value assets, such as rare collectibles or vintage vehicles, where market fluctuations can significantly impact their value. Agreed value policies are commonly used in property insurance, marine insurance, and classic car insurance, among others.
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This glossary post was last updated: 29th March 2024.
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