Question

a money substitue is a claim. a claim is not an economic good but a means of obtating disposal over economic goods. This determines its whole nature and economic significance. essentatilly three elements are involved in the valuation and pricing claim. they are?

Answer 1

BREAKING DOWN Valuation Clause

Any policy which contains a valuation clause should be carefully reviewed to understand the circumstances when a benefit payment is necessary. Also, a policyholder should do a regular review of the listed dollar value for the property. Values which do not keep up with the reasonable cost of living, inflation, or changes to the local Building Code cost increases may not adequately protect the policyholder. Valuation clauses have a basis on an array of different factors about the specific property and individual budget requirements.

Determining the cost of articles covered by insurance is an essential but time-consuming step in getting insurance coverage. By understanding how much an item is worth, the policyholder is better able to determine the level of coverage they require. Also, policyholders should determine coverage based on maximum foreseeable loss. In some cases, the insurance provider may expect the insured to update the value of items covered in the policy periodically using a full reporting clause.

Also, the insurance providers may require the review by an appraiser or specialist to determine the value of a property before underwriting. This requirement is particularly true in cases where the policyholder is getting insurance coverage for classic, antique, customized, and one-of-a-kind property as well as for historic structures or items. An appraisal may also be necessary if a policyholder is attempting to get insurance in a dollar amount which exceeds the assessed value of a property.

Actual Cash Valuation Clause

Actual cash value (ACV) is most frequently the method for calculating property benefit values in a homeowners policy. This value has a basis of the cost of repairing or replacing a piece of property, such as a boat, a car, or a home, to its pre-loss status. The insurer will factor in the depreciation of the property. Depreciation determines how much of an asset's useful lifespan value remains and will impact the benefit value due to the policyholder in the case of a covered loss.

Another consideration of an ACV policy is the Valued Policy Law (VPL). Arkansas, California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Texas, West Virginia and Wisconsin enforce the VPL.

Under this regulation, insurance providers must pay the full, listed face value of a policy in the event of a total loss, without consideration of the depreciated actual cash value. The law requires the payment of the full face value of the policy even if the value at the time of loss is a lower dollar amount. However, in some situations where there is concurrent causation for damage, the insurer may issue a reduced payment.

Replacement Cost Valuation Clause

The replacement cost is the amount necessary to repair or replace a property to the same or equal level of quality as the original property. These costs may change, as the prices in the marketplace change. Depreciation of the property is not a consideration in replacement cost coverage. However, unless a policy also contains a law and ordinance provision, it may not include enough coverage to satisfy all the costs of rebuilding a property.

The law and ordinance clause will increase the replacement benefit amount by a percentage to allow for changes to the State Building Code. This provision becomes crucial in the case of a covered hazard which destroys the property to 50% or more. Most local Building Codes will require structures which receive damages total 50% or more of the home's insured value to be demolished and rebuilt to current codes. Also, policyholders must understand that coverage only applies to the damaged portion of a structure.