Investopedia explains '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.
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