Loss Valuation Types

Back to: TelaClaims Adjuster I – Insurance Basics for Adjusting a Claim

Loss Valuation Types

Replacement Cost Value (RCV)

The cost to replace the property with property of like kind and quality, at current pricing, without a deduction for depreciation. Many property policies providing loss valuation at replacement value require covered property to be insured to a certain percentage of its replacement value, such as 80% or 90%.

Actual Cash Value (ACV)

Actual Cash Value is the amount of the replacement cost minus depreciation that is nonrecoverable. You could think of this as the actual value for which the property can be sold which is always cheaper than the cost to replace that item with a new one.

Agreed Value

In an Agreed Value policy the insurance company and insured agree to a specific value of a particular property before the policy is issued. If a total loss occurs, the insurer will pay the Agreed Value.

Stated Value

In a Stated Value policy, the value of a particular property is on the declarations page but provides for the insurer to pay the lesser of the stated value or ACV of the property following a loss.

Valued Policy Law

A loss valuation method that states the value of the property as the amount shown on the Declarations page and will pay that full face value in the event of a total loss, regardless of the actual cash value.

Functional Replacement Value

The cost to replace the property with other property that performs the same function with similar efficiency, although the replacement property is not identical to the property being replaced. This valuation method is typically used with older property for which the replacement value exceeds the insured’s ability or willingness to purchase coverage.

Fair Market Value (FMV)

Fair Market Value is defined as the feasible price at which a willing buyer will buy from a willing seller. FMV is generally the basis for tax assessment and court awards and is also used as a loss valuation method for some insurance policies.