Valued Policy
Updated on July 18, 2023
A valued policy is an insurance policy where the insurer agrees to pay a predetermined sum of money to the insured or on their behalf in the event of a specified loss.
Understanding valued policy
Fixed payout – The amount of money specified in a valued policy is predetermined and not related to the extent of the loss suffered.
Loss occurrence – The payout under a valued policy is triggered by the occurrence of a specific event or loss, such as the insured’s death in the case of life insurance.
Independent of loss value – Unlike other insurance policies, the compensation in a valued policy is not based on the actual value of the loss. It remains constant regardless of the financial impact of the loss.
Life insurance example – Valued policies are often associated with life insurance, where a predetermined sum is paid to the beneficiaries upon the insured person’s death.
Certainty and peace of mind – Valued policies provide reassurance to the insured by offering a guaranteed payout, ensuring financial support regardless of the circumstances surrounding the loss.
Focus on predetermined sum – Valued policies prioritize the specified amount, providing a straightforward and predictable outcome, rather than assessing the actual financial implications of the loss.
