Valued Policy Law - VPL

AAA

DEFINITION of 'Valued Policy Law - VPL'

A statute that requires insurance companies to pay the full value of the insurance to an insured entity in the event of a total loss. The Valued Policy Law does not consider the actual value of the insured property at the time of the loss; instead, the total loss mandates the total payment.


Not all states within the United States have these laws. States that do have Valued Policy Laws include Arkansas, California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Texas, West Virginia and Wisconsin. Wisconsin was the first state to pass a Valued Policy Law in 1874.

BREAKING DOWN 'Valued Policy Law - VPL'

For example, if a property is insured for $200,000 and is destroyed by a fire, the insurance company would be required to pay the policy's stated value for the property ($200,000) without deduction or offset.


Hurricane Katrina forced the insurance industry in Louisiana to examine the Valued Policy Law; few policyholders were paid their entire coverage amount because of interpretations of the Valued Policy Law. Some insurers claim that the law does not apply because certain losses were a result of a non-covered peril (flood); that certain losses were a result of "mixed causation" - a combination of a covered peril (wind) and a non-covered peril (flood); and that the total loss was offset by other sources including the National Federal Flood Insurance Program and FEMA grants.

RELATED TERMS
  1. Against All Risks - AAR

    An insurance policy that provides coverage against all types ...
  2. Flood Insurance

    A financial instrument that protects real property owners from ...
  3. Catastrophe Insurance

    Insurance to protect businesses and residences against natural ...
  4. Named Perils Insurance Policy

    A home insurance policy that only provides coverage on losses ...
  5. Hazard Insurance

    Insurance that protects a property owner against damage caused ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
Related Articles
  1. Home & Auto

    Getting A Grip On The Cost Of Gas

    Feeling overwhelmed by rising oil prices? We offer some tips that will save you money.
  2. Home & Auto

    Understanding Lender-Required Flood Insurance

    Having to buy flood insurance shouldn't be a surprise. Find out what you need to know when purchasing or refinancing a house.
  3. Insurance

    Do You Need Casualty Insurance?

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

    Tax Relief For Katrina Victims

    Find out if you qualify for the assistance offered to hurricane survivors by the U.S. government.
  5. Technical Indicators

    Use Market Volume Data to Determine a Bottom

    Market bottoms often carve out classic volume patterns that let observant traders make fast and accurate calls.
  6. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  7. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  8. Insurance

    Umbrella Insurance: You May Need It, Too

    If you have assets to protect – or just run a business from home – you could be unpleasantly surprised at how much you need umbrella insurance.
  9. Insurance

    Who is a Beneficiary?

    A beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
RELATED FAQS
  1. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  2. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  3. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  4. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  5. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
  6. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
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!