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💰 '''Agreed value''' is a [[Definition:Valuation method | valuation method]] used in [[Definition:Insurance policy | insurance policies]] where the [[Definition:Insurance carrier | insurer]] and the [[Definition:Policyholder | policyholder]] stipulate, at the time of underwriting, the specific dollar amount that will be paid in the event of a [[Definition:Total loss | total loss]] — eliminating the need for a post-loss appraisal or [[Definition:Actual cash value (ACV) | actual-cash-value]] calculation. This approach is most common in lines where market value can be difficult or contentious to determine after a loss, such as [[Definition:Marine insurance | marine]], [[Definition:Fine art insurance | fine art]], [[Definition:Classic car insurance | classic automobile]], and [[Definition:Aviation insurance | aviation]] insurance. By locking in the value upfront, both parties gain certainty and reduce the potential for [[Definition:Claims dispute | claims disputes]].

📝 To establish the agreed value, the policyholder typically provides an independent [[Definition:Appraisal | appraisal]] or documented evidence of the asset's worth — such as a recent purchase price, auction record, or professional valuation report. The [[Definition:Underwriter | underwriter]] reviews this evidence, may adjust for depreciation or market conditions, and endorses the final figure onto the policy via an [[Definition:Agreed value endorsement | agreed value endorsement]] or schedule. In the event of a covered total loss, the insurer pays the scheduled amount without deducting for depreciation, though [[Definition:Partial loss | partial losses]] are usually settled on a repair-cost basis. [[Definition:Premium | Premiums]] tend to be higher than on comparable [[Definition:Actual cash value (ACV) | ACV]] or [[Definition:Replacement cost | replacement-cost]] forms because the insurer accepts greater valuation certainty at inception.

🏛️ The agreed-value mechanism carries particular weight in [[Definition:High-net-worth insurance | high-net-worth]] and [[Definition:Specialty insurance | specialty]] markets, where one-of-a-kind assets defy standard pricing guides. Policyholders benefit from the elimination of [[Definition:Coinsurance penalty | coinsurance penalties]] and the peace of mind that their recovery matches their expectation. Insurers, in turn, gain a clearer picture of their [[Definition:Exposure | exposure]] at the point of [[Definition:Binding | binding]], which supports more accurate [[Definition:Reserve | reserving]] and [[Definition:Reinsurance | reinsurance]] purchasing. Periodic re-appraisal requirements — often every three to five years — help keep agreed values aligned with market reality and prevent moral-hazard concerns from creeping into the portfolio.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Actual cash value (ACV)]]
* [[Definition:Replacement cost]]
* [[Definition:Stated value]]
* [[Definition:Marine insurance]]
* [[Definition:Total loss]]
* [[Definition:Coinsurance]]
{{Div col end}}

Definition:Agreed value - Revision history

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