When a state does not have a valued policy law, or the valued policy law applies only to certain perils, then the standard valuation or loss settlement provisions of the policy will apply. In the ISO Building and Personal Property Form CP 00 10, the property is valued at actual cash value at the time of loss unless otherwise specified. If the limit of insurance on the building itself meets the coinsurance requirements, then payment is on a replacement cost basis. (Credit: Vittaya_25/Adobe Stock)
Valued policy laws differ among states, but they are united in purpose — protecting policyholders from claims of underinsurance after a loss.
In general, valued policy laws state that, in case of total loss to an insured building by a specific peril, the amount stated in the policy declarations is considered the value of the structure at the time of loss and is payable in full. Even if the value of the structure at the time of loss is less than the amount of insurance, the insurer may not argue that payment should be limited to the lower amount, the actual cash value. Moreover, in most states with valued policy laws, any policy provision inconsistent with the valued policy law is considered void.
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