Valued Policy Law (VPL)
Candlefocus EditorMany states in the United States including California, Arizona, Nevada, and New Jersey have VPL on the books. In other states, the insured must prove the value of the loss in order to receive compensation. Under VPL the value of the insurance claim can be determined using either the actual cash value (ACV) or the replacement cost (RC) method.
Under the ACV method, the insurer takes into consideration things such as depreciation and existing physical condition to determine the current market value of the property, and then compensates the insured the amount of their claim minus this market value. The RC method on the other hand, compensates the insured for the full off the market cost of replacing their property or asset with a comparable object of equal value.
As a result of VPL, insured can be guaranteed to receive full compensation in the event of a total loss, ensuring they are not out-of-pocket for the full amount of their loss.
The mandated VPL legislation provides coverage that ensures reimbursement of the insured's actual loss even in cases that regular property insurance coverage might exclude, such as floods, earthquakes, hurricanes and other disasters that are caused by natural forces.
For this reason, it is important for individuals to consult their states VPL laws to determine the specific types of events and hazards that are covered by their policy. By doing so, individuals can make sure that they are adequately and fully protected for any type of loss that may occur.