Agreed Value
A predetermined amount that an insurance company agrees to pay for a covered loss, regardless of the item's actual market value at the time of loss. This amount is established when the policy is written and eliminates disputes over value during claims.
Example
“The classic car owner chose an agreed value policy for $75,000, ensuring he would receive that full amount if his restored Mustang was totaled.”
Memory Tip
Remember 'Agreed = No Argument' - both parties agree upfront on the value, preventing disputes later.
Why It Matters
Agreed value policies provide certainty and peace of mind, especially for unique items like classic cars, art, or antiques where market value can be subjective or difficult to determine. This prevents lengthy disputes during an already stressful claims process.
Common Misconception
Some people think agreed value means they can set any amount they want, but insurers typically require professional appraisals or documentation to justify the agreed value. The insurer must approve the stated amount based on evidence of the item's worth.
In Practice
Tom owns a 1967 Camaro he restored over 10 years, investing $60,000 in parts and labor. He obtains a professional appraisal showing the car's value at $85,000. His agreed value policy costs $1,200 annually for $85,000 coverage. When the car is stolen two years later, Tom receives the full $85,000 payout, even though similar cars are now selling for $90,000-$95,000 due to market appreciation.
Etymology
The term combines 'agreed' from Old French 'agréer' meaning 'to accept willingly' and 'value' from Latin 'valere' meaning 'to be worth.' It represents a mutual agreement on worth between insurer and insured.
Common Misspellings
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