Valued Contract

Published: | Updated: October 4, 2017

Definition - What does Valued Contract mean?

A valued contract is an insurance policy in which the insurer is obligated to pay a pre-specified amount to the insured in the event of a loss, regardless of the actual value of the loss. The pre-specified amount for valued contracts is typically the full value of the policy. So, people who have a valued contract typically receive complete reimbursement in the event of a loss.

Insuranceopedia explains Valued Contract

Valued contracts are different from non-valued contracts insofar as the latter generally only reimburse the actual cash value of the loss. So, for example, if you have a valued contract for your auto insurance and you total your car after five years of driving it, the insurer will reimburse you for the replacement value of your car. However, if you have a non-valued contract, then the insurance company will only reimburse you for the actual cash value of your car at the time you totaled it. Actual cash value takes into account depreciation, which is usually very significant for cars.

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