Washington State Insurance Practice Exam

What is an agreed value policy?

1. A policy where the value fluctuates with market conditions

2. A policy with values agreed upon at the time of loss

3. A policy with values determined at the time the insurance is written

4. A policy providing actual cash value

The correct answer is: A policy with values determined at the time the insurance is written

An agreed value policy is a type of policy where the value is determined at the time the insurance is written. This means that both the insurer and the policyholder agree on the value of the insured property at the beginning of the policy term. This agreed-upon value is fixed and does not fluctuate with market conditions or change at the time of loss. This type of policy provides a specific, predetermined amount of coverage which can be beneficial for both parties by eliminating disputes over the value of the property in the event of a claim. Options A, B, and D are not correct because they do not accurately describe an agreed value policy.