An insured selects the Agreed Value optional coverage on a commercial property policy. What is the primary effect of this option?
a.It removes all deductibles for the policy term
b.It increases the policy limit by 25% automatically
c.It suspends the coinsurance condition for the policy term
d.It changes the policy from named perils to open perils
Explanation
The Agreed Value option suspends the coinsurance clause for the policy term. The insured and insurer agree on a value (typically through a signed statement of values), and as long as the limit equals or exceeds that agreed value, no coinsurance penalty applies at the time of loss. It does not change the perils insured or eliminate deductibles.
Law Reference: ISO Commercial Property — Agreed Value optionThis topic, taught in full in the California Property & Casualty Broker-Agent guide. California Property & Casualty Broker-Agent Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
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Related questions on this topic
- Under the Building and Personal Property Coverage Form (CP 00 10), which of the following is NOT included automatically in the definition of Building coverage when the insured shows a value for the building?
- A dry cleaner has customer garments on the premises waiting to be picked up. Which coverage category under CP 00 10 most accurately responds to direct physical damage to these garments?
- A commercial building with a replacement value of $1,000,000 carries an 80% coinsurance clause. The insured purchased only $600,000 of coverage. A covered fire causes a $200,000 loss. Ignoring the deductible, how much will the insurer pay?
- A commercial building has been vacant for more than the period specified in the vacancy condition of the Building and Personal Property Coverage Form. Which statement BEST describes the effect on coverage?
- A bakery is forced to close after a covered fire. Which of the following BEST describes what Business Income coverage is designed to pay?
- A wildfire damages neighboring properties (but not the insured restaurant's building). Local police bar access to the entire block for two weeks. Which extension under the Business Income form responds to the restaurant's lost income during this access prohibition?
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