Definition - What does Valuation Clause mean?
A valuation clause is a clause in an insurance contract that provides an exact dollar figure for the amount to be reimbursed in the event of a loss. This figure must be agreed to by both the insurer and the insured. The premiums for the policy are paid in exchange for the promise of reimbursement promise for the value in the valuation clause in the event of a loss.
Insuranceopedia explains Valuation Clause
Valuation clause figures can be based on a number of different things, including replacement value, actual cash value, and agreed value. It is up to the policyholder and the insurer to determine whether they would like to have the full replacement value of the insured item covered, or whether they will take depreciation into consideration. If full replacement value is the figure for the valuation clause, premiums are typically higher than they would be for actual cash value.