Washington Property & Casualty Practice Exam 2025 – The All-in-One Guide to Excel in Your Exam!

In property insurance, 'agreed value' refers to a specific value for the insured property that both the insurer and the insured have determined and agreed upon before any loss occurs. This predetermined value provides clarity and assurance, as it fixes the amount that will be paid in case of a total loss. This agreement helps to eliminate disputes regarding the value of the property at the time of loss, as it is already established in the policy terms.

This concept is crucial in situations where the value of property may appreciate or depreciate over time, or when market fluctuations could complicate how much the insurance company should pay after a loss. By having an agreed-upon value, both parties have a clear understanding of the coverage limits.

The other options do not accurately describe 'agreed value'. While market value may be a consideration, it is not the same as the agreed value since market value can fluctuate and is not predetermined. Additionally, an appraisal may help establish value but isn't the sole determining factor since the agreed value is set by mutual consent. Lastly, determining the value after a loss occurs contradicts the essential principle of 'agreed value', as it specifically pertains to values established before any potential claims.