03.02. Insurance to Value

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  1. Insurance to value
    • insurance written for an amount approximating the full value of the asset(s) insured
    • beneficial to both insurer and insured
    • insurer: premium is adequate to cover losses; simplifies underwriting
    • insured: sufficient funds available in event of loss
  2. How insurers encourage insurance to value
    • insurance-to-value provisions: reduces the amount payable for both partial and total losses if the insured has not purchased adequate limits of coverage
    • coinsurance clause: requires the insured to carry insurance equal to at least a specified percentage of the insured's property's value
  3. Liability vs insurance to value
    • not applicable since there's no limit to liability
    • use insurance rates by layers instead
  4. Homeowners and Businessowners policies
    • insurance-to-value provision: amount payable will never be less than ACV, subject to policy limit
    • if limit correct: pay replacement cost as a reward
    • otherwise: pay cash value as a penalty
    • can use a combination (times did/should)
  5. Insurance-to-value problems
    • underinsurance penalties: not a concern for insureds maintaining limits that meet or exceed coinsurance requirements
    • difficulty in maintaining limits: time value of money, initially an informed guess, hard to evaluate until need replacement / repair
    • property value recommendations: can hire qualified appraiser (reappraise every few year), review periodically, consider coverage options
  6. Coverage options to solve insurance-to-value problems
    • agreed value: optional value that suspends the coinsurance condition if the insured carries the amount of insurance agreed to by insurer and insured
    • inflation guard protection: increases the applicable limit by specified percentage over policy period
    • peak season endorsement: covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period
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03.02. Insurance to Value
2013-03-19 01:13:28
Insurance Value

Insurance to Value
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