What term describes a property policy with an agreed amount of insurance as a fair valuation for the property?

The term that describes a property policy with an agreed amount of insurance as a fair valuation for the property is "Agreed Value." This is a specific agreement between the insurer and the policyholder that establishes the value of the property before a loss occurs. In the event of a claim, the insurer will pay out the agreed amount without any depreciation deductions, provided that the loss falls within the coverage specified in the policy. This can be particularly important for unique or valuable items that may not have a readily determinable market value.

Agreed Value is often utilized in situations where the property’s market value can fluctuate or is difficult to ascertain, offering both parties a clear understanding and agreement of value at the outset of the policy. This helps to prevent disputes over the value at the time of a loss, ensuring a smoother claims process.

In contrast, other terms like Actual Cash Value are typically based on the replacement cost minus depreciation, which may not reflect the amount originally insured. Guaranteed Replacement Cost refers to a policy provision that covers the full cost of replacing an insured item, even if it exceeds the policy limits, but does not involve a pre-established value agreement like Agreed Value does. Fair Value is a more general term and does not specifically reference the insurance context