When it comes to insuring commercial properties, one important aspect to consider is the valuation of the property and its contents. In this article, we will dive deeper into the concept of "agreed value" and why it is crucial for property owners to have this endorsement in their insurance policies. We'll explain what agreed value means, how it differs from other valuation options, and why obtaining accurate values through a Statement of Values (SOV) is essential.

What Is Agreed Value?

Agreed value is an optional endorsement that can be added to a commercial property policy. It essentially eliminates co-insurance requirements by stipulating that the insured amount represents an agreement between the policyholder and the insurance company on what the property or contents are worth. By waiving co-insurance penalties, agreed value ensures that there will be no potential underinsurance penalty if a claim occurs.

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Valuation Options:

Most commercial property policies offer two primary valuation options: replacement cost (RC) or actual cash value (ACV). Replacement cost refers to insuring the building or contents for their full current replacement value without depreciation taken into account. On the other hand, actual cash value considers depreciation when determining compensation amounts.

The Importance of Accurate Valuations:

Accurate valuations are crucial in ensuring appropriate coverage for your commercial property insurance policy. Underinsuring your property could result in significant financial losses during a claim settlement if you face coinsurance penalties due to undervaluation.

Statement of Values (SOV):

To establish agreed values accurately, insurers usually require policyholders to provide a Statement of Values annually. An SOV contains detailed information about each covered item's estimated or appraised replacement cost such as buildings and business personal properties or contents within those buildings.

Submitting updated SOVs at renewal dates helps maintain proper coverage levels based on current market conditions and construction costs while avoiding potential coinsurance penalties. It is important to note that intentionally underestimating property values in an SOV can lead to disputes with the insurer and potentially affect claim settlements.

Benefits of Agreed Value:

1. No Coinsurance Penalties: By opting for agreed value, policyholders are exempt from coinsurance penalties even if their insured amount falls below a specific percentage (often 80% or 90%) of the total property value.

2. Simplified Claims Settlement: In the event of a claim, having agreed value coverage simplifies the process by eliminating discussions on undervaluation or potential penalties related to coinsurance. This allows for quicker and smoother claims settlement.

3. Peace of Mind: Knowing that your property is adequately covered without worrying about potential depreciation calculations brings peace of mind to business owners, enabling them to focus on other aspects of their operations.

Establishing Accurate Agreed Values:

To establish accurate agreed values, it is crucial to provide precise information when completing an SOV form. A thorough assessment should be conducted regularly, taking into account any changes such as renovations or upgrades that may impact replacement costs.

Working closely with an experienced insurance agent who understands commercial property valuations can help ensure accurate valuation assessments and proper documentation submission before policy renewals.


Agreed value endorsement offers substantial benefits for commercial property owners seeking robust insurance coverage while avoiding co-insurance penalties during claim settlements. By submitting accurate Statements of Values annually and working closely with knowledgeable agents, businesses can safeguard their investments effectively.

Remember, maintaining up-to-date valuations through regular reassessments is vital to accurately protect your commercial properties against unforeseen events. If you have further questions regarding agreed value policies or need assistance with your specific situation, don't hesitate to reach out to a trusted insurance professional today!

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