Broad Evidence Rule
What Does Broad Evidence Rule Mean?
The broad evidence rule is a guideline that insurance companies are often required to follow when determining the value of losses sustained by policyholders. According to this rule, there is no single, fixed method for determining the value of lost items; instead, the most accurate and relevant means available will be used. The rule comes up most often in property claims, where homeowners insurance companies may differ in how they calculate what a lost or damaged item was actually worth.
Insuranceopedia Explains Broad Evidence Rule
The broad evidence rule serves as an alternative to determining value based on actual cash value. Actual Cash Value (ACV) is calculated by taking the replacement cost and subtracting depreciation. While actual cash value can be useful in many situations, it does not always accurately reflect the value of a loss. This is because it does not consider factors such as tax value, the age of the property, and potential profits that may have accrued from the asset over time. In auto claims, for example, a strict ACV calculation can leave the policyholder owing more on a car loan than the insurer pays out, which is the specific problem GAP insurance exists to cover.
