What Does Three-Fourths Value Clause Mean?
The three-fourths value clause was found in some property insurance contracts. It states that the insurance company would not be liable to pay more than three-fourths, or 75 percent, of the cash value of the property. For example, if your house worth $100,000 burns down, an insurance policy with this clause would offer coverage up to $75,000 for a claim.
Insuranceopedia Explains Three-Fourths Value Clause
Insurance companies used the three-fourths value clause as a way to encourage policyholders to be more careful with their property. The idea was that since policyholders would have to pay a sizable amount after a loss, they would be more careful with their property and prevent careless damage. Policyholders who accepted this clause were able to get coverage at a lower rate.
Today, insurance companies rarely use the three-fourths value clause. Instead, policyholders can get a similar deal by accepting a policy with less coverage or with more out-of-pocket fees like deductibles and coinsurance.