Valued Policy Law

What Does Valued Policy Law Mean?

The valued policy law is a law that requires insurance companies to reimburse policyholders for the full value of their loss under a valued policy, rather than its actual cash value. Unlike actual cash value, the full value does not account for depreciation.

Insuranceopedia Explains Valued Policy Law

The valued policy law has been adopted in many states, although some states have yet to implement it. The primary reason people purchase valued policies is to ensure they receive full reimbursement in the event of a loss. The purpose of the law is to protect valued policyholders, ensuring they are not disadvantaged or cheated in the case of a total loss that is covered by the policy.

These laws come into play most often after a house fire destroys a home, which is why it is worth understanding how homeowners insurance covers fire damage before a loss occurs. Because the valued policy law varies by state, the payout you receive after a total loss can differ significantly depending on where you live, so comparing the best homeowners insurance companies in your state is a practical first step.