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 ‭(Hidden)‬ Catalog-Item Reuse

What You Need to Know About ‘Valued Policy’ States

What's the difference between a “valued policy” state and one that is not? Does this apply to both personal and commercial lines policies? Is it specific to named or special form perils, or to certain types of policies?
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Q: Can you explain the difference between a “valued policy” state and one that is not? Does this apply to both personal and commercial lines policies? Is it specific to named or special form perils, or to certain types of policies?

A: In the most general terms, valued policy laws require an insurer to pay the face amount of the policy in the event of a total loss to a structure. In these situations, it does not matter whether the replacement cost is lower than the face amount.

There are also "modified valued policy” states that require an insurer to refund the premium for any additional amount of coverage over the replacement cost. However, the carrier doesn't have to pay any more than the replacement cost or actual cash value, depending on the settlement option in play. 

Each valued policy state applies the law differently. Some states limit their laws to residential properties; some extend to all property types. Some states limit the causes of loss to which the statue applies—most commonly, fire only. Consult your state's law for specifics. ​

Here is some information that may help: 

State

Statute

Property Protected

Causes of Loss

Arkansas

23-88-101

All real property

Fire and natural disasters, excluding flood and quake

California

2052, 53, 54, 55, 56, 58 and 75

Buildings

All perils covered by the property policy

Florida

627.702

Any building, including mobile and manufactured homes

All perils covered by the property policy

Georgia

33-32-5

One or two family residential buildings

Fire

Kansas

40-905

All improvements on real property

Fire, tornado, wind, lightning

Louisiana

22:1318

Inanimate or immovable property

Fire

Minnesota

65A.08

All property

All perils covered by the policy

Mississippi

83-13-5

Buildings

Fire

Missouri

379.140; 145

All property

Fire

Montana

33-24-102 and 103

Improvements to real property

All perils covered by the property policy

Nebraska

44-501.02

Real property

Fire, tornado, wind, lightning, explosion

New Hampshire

407:11

Buildings

Fire and lightning

North Dakota

26.1-39-05

Real property

All perils covered by the property policy

Ohio

3929.25

Any building

Fire and lightning

South Carolina

38-75-20

All real property

Fire

South Dakota

58-10-10

Real property

Fire, lightning, and tornado

Tennessee

56-7-801 to 803

Any building

Fire

Texas

862.053

All real property

Fire

West Virginia

33-17-9

Real property

All perils covered by the property policy

Wisconsin

632.05(2)

Owner-occupied dwellings

All perils covered by the property policy

 
Chris Boggs is executive director of the Big “I” Virtual University (VU).

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

14014
Tuesday, June 2, 2020
Personal Lines