Which method of property insurance valuation guarantees payment of the full policy limit at the time of application?

The Agreed Value method of property insurance valuation is designed to provide a predetermined amount that both the insurer and the insured agree upon at the start of the policy. This means that in the event of a covered loss, the insurer will pay the agreed-upon amount regardless of the current market value or replacement cost at the time the claim is made. This approach is particularly beneficial for unique or hard-to-value items, as it eliminates disputes over valuation at the time of a claim.

In contrast, the other methods of valuation serve different purposes. Market Value considers the current selling price of the property in the marketplace, which can fluctuate over time. Replacement Cost refers to the amount needed to replace the damaged property with new, like-kind materials, and may or may not reflect the full policy limit depending on current replacement prices. Actual Cash Value combines the cost of replacement with depreciation, leading to a lesser payout based on the property's diminished value rather than the total value agreed upon at policy inception. Therefore, Agreed Value is the method that exclusively ensures the insured receives the full policy limit at the time of application.