Written by Chris Boggs, Executive Director of the Big “I” Virtual University (VU), originally published by IA Magazine
Question:
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?
Answer:
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 |
To see Ohio's "valued policy" law, click here.
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.
