Definition
An Agreed Value Policy is an insurance arrangement where the insurer and policyholder establish and agree upon the value of covered items at policy inception. In the event of a total loss, the insurer pays the predetermined agreed value without further appraisal or depreciation calculations.
Significance in Alternative Asset Valuation
Agreed value policies are essential for alternative asset collections:
Benefits:
- Certainty: Known recovery amount eliminates post-loss disputes
- Simplicity: No depreciation debates or condition arguments at claim time
- Adequate coverage: Forces periodic valuation ensuring coverage keeps pace with appreciation
- Peace of mind: Collectors know exactly what protection they have
Requirements:
- Current appraisal: Insurers typically require professional valuations to establish agreed values
- Regular updates: Values must be reviewed periodically (usually annually) as markets change
- Documentation: Detailed inventory supporting the agreed values
- Premium basis: Higher agreed values mean higher premiums
For appreciating alternative assets, agreed value policies prevent the underinsurance that can occur when coverage is based on original purchase prices or outdated appraisals.
How Impossival Approaches This
We provide current valuations that support agreed value policy discussions with insurers. Our regular portfolio updates help ensure agreed values remain appropriate as markets evolve.
Related Concepts
• Agreed Value - The predetermined coverage amount • Actual Cash Value - Alternative coverage basis with depreciation • Replacement Cost - Coverage for full replacement without depreciation • Insurance Valuation - Methods for determining insurable values