Property · Insurance Term
Agreed Value (Agreed Amount)
Definition
Agreed value is an optional property coverage feature where the insurer accepts your reported values and waives the coinsurance penalty for the policy term. If you insure to the agreed amount, a partial loss will not be reduced for being underinsured.
In Plain English
Most commercial property policies include a coinsurance clause that penalizes you at claim time if your limit is below a set percentage of the building's value. Agreed value suspends that clause. In exchange, the insurer usually asks for a signed statement of values showing what each building would cost to rebuild.
Agreed value does not mean the insurer will pay the agreed amount on any loss. It still pays the actual loss, up to the limit, under the policy's valuation terms. What it removes is the risk of a coinsurance penalty, as long as your limit matches the agreed amount.
Agreed value usually lasts for the policy term or a stated period. If you add buildings or values rise, update your values; otherwise the protection may lapse at renewal. It is often paired with a blanket limit for multi-building portfolios.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: an owner reports a $2,000,000 rebuild value on a retail building and the insurer endorses agreed value at that amount. After a $300,000 fire loss, the insurer later decides the true rebuild value was $2,400,000. Because agreed value applies, the claim is not reduced for coinsurance; it pays $300,000 less the deductible.
What to Watch For
- Check the declarations for the words agreed value and the expiration date of that feature.
- Support your values with a recent valuation or cost estimate, not purchase price.
- Update the statement of values when you renovate, add buildings or see big cost changes.
- Ask whether agreed value also applies to business income coverage.
Common Questions
Does agreed value mean I get the full limit after a total loss?
Not necessarily. It removes the coinsurance penalty; the payment still depends on your actual loss, valuation terms and limit. Your policy's wording controls.
Does agreed value cost more?
Sometimes it does, and some insurers require supporting valuations. For many owners the protection against a coinsurance penalty is worth asking about.
Last updated October 14, 2026 · Primesure editorial team · How We Write