DEFINITION of 'Valuation Clause'

A provision in certain insurance policies that specifies the amount of money that the policy holder will receive from the insurer if an insured event occurs. The valuation clause stipulates a fixed amount of money that will be paid for insured property in the event of a loss. Several types of valuation clauses can be written, including replacement cost, actual cash value, stated amount and agreed value.

BREAKING DOWN 'Valuation Clause'

An insurance policy's valuation clause is important because it determines the dollar amount that will be paid in the event of a loss. Because different types of valuation clauses can be used, policyholders should review insurance policy details to determine if adequate coverage is in place.


Valuation clauses can be based on:


Replacement cost: the cost to repair or replace property using the same level of quality as in the original property.


Actual cash value: the cost of repairing or replacing the property, minus any depreciation.


Stated amount: the maximum value of an insured item.


Agreed value: a fair market value to which to insurer and insured agree.

RELATED TERMS
  1. Full Reporting Clause

    Full reporting clause is an insurance policy provision requiring ...
  2. Waiver Of Inventory Clause

    A clause in an insurance policy that says that the insurance ...
  3. Distribution Clause

    An insurance policy provision which determines how the coverage ...
  4. Hammer Clause

    An insurance policy clause that allows an insurer to compel the ...
  5. Liberalization Clause

    Liberalization clause is an insurance policy provision that allows ...
  6. Market Value Clause

    An insurance policy clause that sets the value of covered property ...
Related Articles
  1. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  2. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  3. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  4. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  5. Insurance

    The Importance Of Property Insurance

    Property insurance is important, but there's a lot you need to learn in order to get the proper coverage.
  6. Financial Advisor

    Life Insurance Replacement: Rules, Laws & Regulations

    When replacing a life insurance policy, a lot can go wrong for the consumer. Find out how life insurance replacements are regulated by the states.
  7. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  8. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  9. Managing Wealth

    Protect Your Company From Employee Lawsuits

    Understanding employment practices liability insurance is easy, once you know the basics.
RELATED FAQS
  1. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Answer >>
  2. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  3. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  4. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  5. What are examples of the largest companies in the insurance sector?

    Read about some of the largest and most influential companies in the insurance sector, a list that includes Berkshire Hathaway ... Read Answer >>
  6. What caused the European / Eurozone debt crisis?

    Understand how insurance companies price insurance premiums, and learn the importance of data and statistics in the insurance ... Read Answer >>
Hot Definitions
  1. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
  2. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  3. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  4. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  5. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  6. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
Trading Center