What Does Valuation Mean?
Valuation is a financial assessment of the worth of an item. In the context of insurance, valuation refers to giving a dollar figure for assets to be insured. This way both the insured and the insurer know how much money the insurer will give to the insured in the event of a covered loss for the asset.
Insuranceopedia Explains Valuation
Many insurance policies contain "valuation clauses." Valuation clauses are clauses in insurance policies that provide a dollar figure for the asset being insured. This figure can be based on several different types of assessments. For example, it could be based on the replacement cost of the asset, the actual cash value, a stated amount, or an agreed value. Often, a policyholder will have to make a decision when purchasing the policy as to which type of valuation he or she would prefer. Higher valuations often require higher premiums.