An agreed value provision on a commercial property policy works by:
Explanation
Agreed value is written after the insured files a statement of values that the insurer accepts, and in exchange the coinsurance condition is suspended, so a partial loss is settled without any underinsurance penalty. It does not turn the policy into a promise to pay the limit for every loss: the loss is still measured and the deductible still applies. Automatic increases in the limit as costs climb are the work of an inflation guard, not of agreed value.
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Related questions on this topic
- The limit of insurance shown on the declarations for a building tells the insured:
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- An inflation guard provision attached to a property policy:
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