Valuation Clause

What Does Valuation Clause Mean?

A valuation clause is a provision in an insurance contract that specifies the exact dollar amount to be reimbursed in the event of a loss. This amount must be agreed upon by both the insurer and the insured. The premiums for the policy are paid in exchange for the insurer’s promise to reimburse the agreed-upon value as outlined in the valuation clause if a loss occurs.

Insuranceopedia Explains Valuation Clause

Valuation clause figures can be based on several factors, including replacement value, actual cash value, and agreed value. It is up to the policyholder and the insurer to decide whether to cover the full replacement value of the insured item or to consider depreciation. If the full replacement value is chosen for the valuation clause, premiums are typically higher compared to those based on actual cash value.