Agreed Value Clause
Agreed Value Clause
Friend? Or Sometimes Foe?
The Agreed Value Option is an excellent tool for policy holders to avoid the penalty of the coinsurance clause in both property and business income insurance. It can also create problems if not properly exercised.
Be sure that: 1) the values used are reasonably accurate: 2) the agreed value endorsement is extended before expiration to avoid reapplication of coinsurance; and 3) the amount of insurance equals or exceeds the required amount.
"A major problem with coinsurance is that coinsurance applies to values at the time of loss, not at policy inception when the amount of insurance is usually established."