The Purpose of Valued Policy Laws
Valued policy laws differ among states, but they are united in purpose—protecting insureds from an insurer's claim 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 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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Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.