In the event of a claim, what does an agreed value policy ensure?

An agreed value policy ensures that in the event of a claim, the insured will receive a guaranteed payment for the amount that was previously agreed upon between the insurer and the insured at the inception of the policy. This means that both parties have determined a specific value for the insured item, which will be the basis for any claim settlement, regardless of the market value or condition of the item at the time of loss.

This arrangement provides certainty and removes ambiguity from the claims process, as it mitigates disputes regarding depreciation or fair market value that could arise following a loss. For instance, if an insured item is lost or damaged, the agreed figure is what will be paid out, simplifying and speeding up the settlement process.

In contrast, other options suggest scenarios where the payout could fluctuate significantly based on external factors such as market values, depreciation, or appraisals, which are not the focus of an agreed value policy.