What does Agreed Value Coverage suspend with property policies?

Agreed Value Coverage is designed to address the concerns associated with the coinsurance clause found in many property insurance policies. This clause typically requires the policyholder to insure the property for a certain percentage of its value to receive full compensation in the event of a loss. If the property is underinsured, the insurance payout can be reduced based on the proportion of actual coverage to the required coverage.

When Agreed Value Coverage is in place, both the insurer and the insured agree on the value of the property at the start of the policy. This agreement effectively suspends the coinsurance requirement because it establishes a predetermined value that the insured will receive in the event of a loss. This feature offers policyholders peace of mind, knowing that they are covered for the agreed-upon amount, without the risk of a coinsurance penalty.

Additionally, this type of coverage can help eliminate disputes regarding property value at the time of a claim, as both parties have already established a consensus on the property's worth. Thus, by suspending the coinsurance clause, Agreed Value Coverage simplifies claims processes and provides a clear framework for settling losses.