Valued Policy in Fire Insurance

A valued policy is a type of insurance that provides coverage for a specific amount, regardless of the actual value of the asset insured. In this policy, the insurance company will pay a predetermined value of the asset in the event of its loss or damage, regardless of its actual value at the time of loss or damage.

Such policies are bought by individuals and companies who own high-end assets. A valued policy, for example, includes high-end buildings, ancestral heirlooms, rare artwork or any object of sentimental value which is hard or impossible to replace.

A valued policy is considered different from other types of policies; for example, in an indemnity policy, coverage is provided on the insured property’s value at the time of loss or damage. This means that the insurance amount can vary (high or low) based on the current market value of the insured assets, but that is not the case with valued insurance.

In some cases, if the market value of the lost insured property is more than the valued insurance, it might be considered a loss. However, people still prefer valued policies to safeguard their high-end or sentimental-value assets and properties.

A valued policy in fire insurance helps simplify the claim settlement procedure by stating the predetermined value of the insured asset. It means that in the event of loss or damage due to fire, insurance compensation will be paid at the predetermined value. The policy is bought to safeguard high-end buildings and assets that possess sentimental value.

Pre-Agreed Value

The basic and most important feature of a valued policy is that the insurance amount is predetermined and needs to be paid in events of property loss or damage. The insurance company and policyholder agree on the value of the insured property before policy issuance.

Then, the insurance company has to pay that agreed-upon compensation for the loss regardless of the actual value of the property during the loss.

Policy Premiums

The premiums for valued policies are typically higher than for other types of insurance. The reason behind this is that the insurance company agrees to pay a predetermined value in compensation for loss. The policyholder may also have to pay a higher deductible than for other insurance policies.

Claim Settlement Procedure

In the event of a total loss of the insured asset, the policyholder has to provide the insurance company with proof of loss to initiate the claim settlement procedure. Moreover, before the insurance is issued, the policy buyer also has to provide proof of ownership and the value of assets to the insurance company.

Home Insurance

As its name suggests, this type of valued policy protects homeowners from the loss and damage of their property. Valued home insurance pays the full compensation amount in the event of total loss or damage to the property.

For example, suppose the property gets damaged due to a fire incident. In that case, the insurance company needs to pay the full predetermined value of the property as compensation, even if the property’s worth is less at the time of loss.

Jewellery Insurance

A jewellery valued policy protects antique and valuable jewellery and provides full compensation in the event of loss. The amount of compensation is predetermined and needs to be paid regardless of the current market price of the insured jewellery during the event of loss. For example, if the jewellery gets stolen, then the insurance company will pay out the full pre-agreed amount of compensation for loss.

Antique Car Insurance

Antique or classic car insurance is another type of valued policy in which the insurance company agrees to pay a predetermined value in the event of the total loss of the antique vehicle. The insurance is ideally bought by car collectors or people who have high-end cars.

For example, if the car gets destroyed due to an accidental fire, then the insurance company needs to pay the full insured amount as pre-determined during the policy issuance.

-Pros of Valued Policy

-Provides Certainty

Going through a financial loss due to property damage is the worst; that is why having an insurance policy that can provide you with certain solutions is necessary. A valued policy offers certainty in the event of loss.

In a valued policy, the policyholder knows the exact compensation value that they will get if they suffer loss or damage to their insured property. It helps in keeping the policyholder’s mind at ease and at peace.

-No Underinsurance

A valued policy also helps policy buyers avoid the difficult situation of underinsurance.

Underinsurance happens when the policy buyer does not have enough coverage to replace the property fully in the event of a loss. Valued insurance guarantees specific predetermined compensation that helps provide enough coverage to replace the property fully.

-Cons of Valued Policy

-High Premiums

Valued policies have higher premium prices than other policies because insurance companies take greater risks by promising a predetermined value of the full compensation. Thus, they charge higher premiums to compensate for the greater risk they take.

-Scarce Availability

A valued policy is not available for every type of property. There is an eligibility criterion for getting a valued policy, which is that your property/asset must be antique, rare, or of very high value and might be hard to replace. If you buy regular car or property insurance, then you will not be able to buy a valued policy.

-Over-Insurance

In some cases, the policy buyer insures the property for more than its actual worth, which leads to over-insurance. It can lead to unnecessary costs and can cause problems if the insurance company only pays for the agreed-upon value.

-Inflation in Valuation

Sometimes, insurance companies and policy buyers overvalue the property to secure a higher payout in the event of loss or damage. It might lead to issues during the claim procedure and can be considered ethically wrong.

-Valuation Disputes

In some cases, during the claim settlement procedure, a dispute might emerge between the insurance company and policyholder regarding the value of the insured property. Resolving such disputes can not only be time-consuming but also leads to feelings of mistrust between both parties.

A valued policy is a category of fire insurance policy considered by individuals and entities with high-value assets. It ensures that policyholders receive a predetermined value of their holdings in events of loss due to fire or any related reason.

You could even call it a subset of business insurance, which is a policy that every company should invest in to keep its assets and finances safe. So, having a valued policy under fire and burglary insurance helps provide financial assistance in events of fires, vandalism, etc., leading to the damage and loss of high-value assets.

Various insurance companies provide business insurance, like us, at Tata AIG. Our fire insurance policy includes an extensive list of coverage, is suitable for all businesses and we offer a hassle-free claim procedure.

Who needs a fire insurance policy?

A fire insurance policy is crucial for anyone who wants to protect their assets from fire damage. People who should have fire insurance include homeowners, renters/tenants and business owners.

What is excess in fire insurance?

Excess in insurance is a predetermined amount to be paid by the policyholder in the event of a loss, and the loss is the uninsured part.

What are the points to consider when buying a fire insurance policy?

Some crucial points that policy buyers should keep in mind while buying fire insurance are:

• The value of their building and its contents

• Their geographical location

• Policy limits

• Type of business they are running

• Deductibles