Stated amount vs agreed value policies

A standard auto, boat or equipment policy pays actual cash value after a total loss: what the item would have sold for the day before. For a late-model car that is a fair and easily established figure. For a restored pickup, a wooden boat, a modified off-road vehicle, a food truck with a custom build-out, or a piece of machinery no longer manufactured, actual cash value is a guess made after the fact by an adjuster with few comparables, and the guess is usually low. Two policy forms exist to replace the guess with a number chosen in advance. They look alike on the declarations page and behave very differently at claim time.

Agreed value means the carrier and the insured have settled the figure before the loss and the carrier pays it, less any deductible, if the item is destroyed or stolen. Stated amount means the insured has declared a figure that the carrier will use as the maximum it pays, while still settling at actual cash value if that is lower. One is a promise; the other is a cap. The words are used interchangeably by people who have not had a claim, and never by people who have.

Agreed value: the figure is the settlement

Under an agreed value form the carrier accepts a valuation at inception, often supported by an appraisal, photographs, receipts for restoration or build work, or a recognised price guide, and writes that figure into the policy. On a total loss it pays the figure without depreciation and without a fresh valuation. The premium is calculated on the agreed figure, so overstating it costs money every year and understating it costs money once.

Agreed value is the standard form for collector and classic car policies, for many boat and yacht policies above a certain value, and for fine art, jewellery and other scheduled items under a floater. Carriers control their exposure by underwriting the item and the owner rather than by adjusting the payout: collector car policies typically require secure storage, limited annual mileage, a clean record and a second daily-use vehicle in the household. The figure should be reviewed at each renewal, since a rising market leaves the owner underinsured and a falling one overpaying premium.

Stated amount: the figure is the ceiling

Under a stated amount form the insured declares a value and the carrier writes it on the declarations page, but the settlement clause says the carrier pays the least of three things: the stated amount, the actual cash value at the time of loss, or the cost to repair or replace. The figure is not an agreement about worth; it is a limit the carrier will never exceed and a basis for premium. If the item has depreciated below the stated amount, or the adjuster's valuation comes in below it, the lower figure is paid.

Stated amount is common on commercial auto policies for trucks and specialised vehicles, on some motorcycle and off-road vehicle forms, on equipment floaters, and on standard auto policies where an endorsement is used to recognise custom equipment. It exists because carriers writing those lines want a cap on unusual vehicles without committing to a valuation they did not verify. It is not a deceptive product; it is an ordinary property form with a maximum written in. The confusion comes from owners who read the figure as a promise.

The mechanism that differs: who bears the valuation risk after the loss

In an agreed value policy the valuation risk is settled before the loss and borne by the carrier afterwards: if the item was worth less than the figure on the day it burned, the carrier still pays the figure. In a stated amount policy the valuation risk stays with the owner: the figure protects the carrier from paying too much and does nothing to protect the owner from being paid too little. The premium for agreed value is somewhat higher for that reason, and for the underwriting that supports it.

The difference shows sharpest on items whose market value is hard to establish or whose owner has invested in them beyond their resale value. A restoration that cost twice what the finished car would fetch at auction, a lift kit and armour on a side-by-side, a custom kitchen in a trailer: under stated amount the adjuster values the finished item as the market would, not as the owner paid, and the receipts matter only as evidence of condition. Under agreed value the receipts were used at inception to set the figure and the figure is what pays.

A worked claim

Suppose a collector in Scottsdale owns a restored 1969 pickup into which he has put $70,000 over five years, and comparable trucks sell at auction for around $55,000. He insures it for $70,000. A garage fire destroys it. Under an agreed value policy at $70,000, the carrier pays $70,000 less a $500 deductible. Under a stated amount policy at $70,000, the adjuster pulls three auction comparables averaging $55,000, adjusts for condition, and settles at $56,000 less the deductible; the $14,000 difference is the owner's, and the premium he paid on the higher stated figure bought him nothing above what actual cash value would have paid anyway.

Now suppose instead the market for that model had risen and comparables were selling at $80,000 when the fire happened. Under agreed value the carrier pays $70,000; the owner is underinsured by his own choice not to update the figure at renewal. Under stated amount the carrier pays the least of the stated $70,000 and the $80,000 actual cash value, so $70,000 again; here the two forms pay the same, and the cap is what bound. The figures are invented. The point is that stated amount can only ever pay the same as or less than agreed value at the same figure, and pays less precisely when the owner's investment exceeds the market.

Who each form suits

• Agreed value suits any item whose value is above the market's view of it, or hard for an adjuster to establish: collector and classic cars, restored or modified vehicles, custom boats, aircraft, scheduled jewellery and art, and a business's one-off machinery. It suits an owner willing to document the value at inception and update it.
• Stated amount suits an item whose actual cash value is readily established and whose owner simply wants the carrier to recognise a figure above a standard form's default, such as custom equipment on a work truck or a motorcycle with accessories, and who understands that the payout will be actual cash value up to that cap.
• Stated amount is also what is available on many commercial and off-road lines where no agreed value market exists; there the task is to set the figure honestly at actual cash value rather than at cost, since premium is charged on the stated figure and the excess buys nothing.
• Neither suits an owner who has not kept photographs, receipts and any appraisal; both forms pay on evidence at inception or at loss, and the owner without records is settled low under either.

The decision rule

Read the settlement clause, not the declarations page. If it says the carrier pays the agreed value shown, the figure is a promise. If it says the carrier pays the lesser or least of the stated amount and actual cash value, the figure is a cap, whatever the agent called it. For any item worth more to you than to the market, seek an agreed value form and support the figure with an appraisal; if the carrier will not write agreed value, insure at a stated amount equal to a realistic actual cash value and keep the restoration receipts as evidence of condition, not as a claim for their sum. Update the figure at every renewal in either case.

When the answer is to keep what you have

A daily-driven car, a production boat a few years old, or a standard work truck is correctly insured at actual cash value on a standard form, and moving it to either of these forms adds premium for a problem it does not have. A collector car already on an agreed value policy with a current appraisal is correctly insured and needs only the annual review of the figure. Where an owner in Arizona, Nevada, Utah or Idaho shows us a stated amount policy on a vehicle they believe is insured for its restoration cost, we say so plainly and quote the agreed value market; where the form already matches the item, we say that instead and leave it in place.