Valuation Clause

AAA

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.

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.

RELATED TERMS
  1. Commercial Property Insurance

    Insurance that is used to cover any type of commercial property. ...
  2. Insurance Underwriter

    A financial professional that evaluates the risks of insuring ...
  3. Insurance

    A contract (policy) in which an individual or entity receives ...
  4. Homeowners Insurance

    A form of property insurance designed to protect an individual's ...
  5. Adjuster

    An insurance claims agent. A claims adjuster is charged with ...
  6. Coastal Barrier Improvement (CBI) ...

    A federal law that makes federal disaster relief and federal ...
RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  2. How do I use the rule of 72 to estimate compounding periods?

    The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>
  3. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  4. What is the difference between induced consumption and autonomous consumption?

    The first step to determining the difference between autonomous and induced consumption is to look at what each of these ... Read Full Answer >>
  5. How does stratified random sampling influence government policy decisions?

    Governments use various analytical techniques to examine the potential costs and benefits of policy options. One of those ... Read Full Answer >>
  6. What do insurance companies qualify as hazardous activity?

    An insurance company defines a hazardous activity essentially as any type of undertaking with a high level of risk of injury ... Read Full Answer >>
Related Articles
  1. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  2. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  3. Home & Auto

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  4. Home & Auto

    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.
  5. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  6. Personal Finance

    Affordable Ways For Upgrading Your Home

    Upgrading your home doesn’t have to be an expensive chore. Here we give you 8 affordable ways to increase its appeal.
  7. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  8. Retirement

    Millennials: Retire With $1,000,000 --Here's How

    It is possible for Millennials to retire with $1,000,000, if they take the right steps and make the necessary sacrifices now.
  9. Budgeting

    The Adverse Effects of Cheap Gas

    While low gas prices are welcomed, smart budgeters must anticipate future price hikes and consider the impact of low gas prices on investments and taxes.
  10. Budgeting

    Top 6 Best Value Hotels

    Here are the top value hotels across America, most of which can be had for less than $100 per night and less than $50 per night if booked in advance.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!