Which term describes a pre-policy agreement on value, paid if a total loss occurs?

Which term describes a pre-policy agreement on value, paid if a total loss occurs?

• A. Agreed Value
• B. Replacement Cost
• C. Market Value
• D. Actual Cash Value

Answer: (A)

Agreed Value describes a pre-policy agreement on value, paid if a total loss occurs. The insurer and insured fix the payout amount upfront, and that agreed amount is paid out in a total loss (up to the policy limit), regardless of how the property's value might change afterward. This setup is particularly helpful for items with volatile or hard-to-pin-down values, like antiques or collectibles. In contrast, Replacement Cost covers the amount needed to replace the item with a new one, Market Value reflects what the item would fetch in the current market, and Actual Cash Value equals replacement cost minus depreciation. So the pre-agreed payout on total loss is provided by Agreed Value.

Agreed Value describes a pre-policy agreement on value, paid if a total loss occurs. The insurer and insured fix the payout amount upfront, and that agreed amount is paid out in a total loss (up to the policy limit), regardless of how the property's value might change afterward. This setup is particularly helpful for items with volatile or hard-to-pin-down values, like antiques or collectibles. In contrast, Replacement Cost covers the amount needed to replace the item with a new one, Market Value reflects what the item would fetch in the current market, and Actual Cash Value equals replacement cost minus depreciation. So the pre-agreed payout on total loss is provided by Agreed Value.