Total Loss Settlement is Valued Policy State

January 27, 2016

This question is about when a dwelling with no coverage issues is deemed a total loss in a valued-policy state (not a state-specific question, so this will be left out). When the valuation's ACV amount exceeds the limit of liability, will the deductible be subtracted from the limit of liability or will the limit of liability be paid by the carrier without subtracting the deductible from that amount?

For example: Limit of liability is $100,000.00 and the deductible amount is $2,500.00. Is the insured (and any other applicable payees) given $100,000.00 or $97,500.00 for a total loss?

Tennessee Subscriber

While the policy states that the deductible is subject to the policy limits that apply, it also states that what is paid out is that part of the total of all loss payable that exceeds the deductible. The amount over the limit is not payable, so it is not included in the calculation. Therefore, even if the total amount of loss exceeds the policy limits, the deductible is applied to the policy limit. So, if the policy limit is $100,000 and the loss is $150,000 and the deductible is $2,500, the amount paid out is $97,500.

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