Under the agreed value method, if there is a total loss, what happens?

Under the agreed value method, if there is a total loss, what happens?

• A. The insurer pays the true value at the time of loss.
• B. The insurer pays the agreed value specified in the policy.
• C. The insurer pays the market value.
• D. The insurer pays replacement cost value.

Answer: (B)

Under the agreed value method, the value of the property is fixed in the policy by agreement between the insurer and the insured. If there is a total loss, the insurer pays the pre‑agreed amount stated in the policy (up to the policy limit), regardless of changes in market value or depreciation. This provides certainty for items whose value can be hard to pin down or fluctuate, like jewelry or art.

Under the agreed value method, the value of the property is fixed in the policy by agreement between the insurer and the insured. If there is a total loss, the insurer pays the pre‑agreed amount stated in the policy (up to the policy limit), regardless of changes in market value or depreciation. This provides certainty for items whose value can be hard to pin down or fluctuate, like jewelry or art.