What Does Agreed Amount Clause Mean?
Agreed amount clause is a provision in a commercial property insurance policy that legally relinquishes the co-insurance responsibility once the policyholder provides and signs a statement of values of the covered property. This provision is binding until the policy expires.
Insuranceopedia Explains Agreed Amount Clause
The requirement for the agreed amount clause is a statement of values. It is a document that shows the value of the property insured, signed by the insured. The insurance company requires it so that once it covers a risk, it becomes the legal basis for determining the amount of money to be released for coverage. Thus, the insured can no longer contest the amount of coverage. The absence of co-insurance also means that if the coverage is insufficient, the policyholder will still spend their own money for the insufficiency. This could happen if the policyholder undervalues their property in the statement.
This clause is also called "agreed value coverage option or provision."