Valued Policy Law (VPL)

Valued Policy Law (VPL)

What is ‘Valued Policy Law – VPL’

A statute that requires insurance companies to pay the full value of the insurance to an insured entity in the event of a total loss. The Valued Policy Law does not consider the actual value of the insured property at the time of the loss; instead, the total loss mandates the total payment.

Not all states within the United States have these laws. States that do have Valued Policy Laws include Arkansas, California, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Texas, West Virginia and Wisconsin. Wisconsin was the first state to pass a Valued Policy Law in 1874.

Explaining ‘Valued Policy Law – VPL’

For example, if a property is insured for $200,000 and is destroyed by a fire, the insurance company would be required to pay the policy’s stated value for the property ($200,000) without deduction or offset.

Hurricane Katrina forced the insurance industry in Louisiana to examine the Valued Policy Law; few policyholders were paid their entire coverage amount because of interpretations of the Valued Policy Law. Some insurers claim that the law does not apply because certain losses were a result of a non-covered peril (flood); that certain losses were a result of “mixed causation” – a combination of a covered peril (wind) and a non-covered peril (flood); and that the total loss was offset by other sources including the National Federal Flood Insurance Program and FEMA grants.

Further Reading

  • The Uncertain Scope of Hurricane Damage under State Valued Policy Laws – [PDF]
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  • Determinants of environmental accounting practices in local entities: evidence from Portugal – [PDF]
  • Critical Factors Affecting the Innovation Activities of Businesses: Evidence from Binh Dinh Province, Vietnam – [PDF]
  • The balanced scorecard as a tool for environmental management: approaching the business context to the public sector – [PDF]
  • Capital mobilization solutions for revenue increase of road transport infrastructure development in Viet Nam – [PDF]
  • Green policies and public finance in a small open economy – [PDF]
  • Physics and financial economics (1776–2014): puzzles, Ising and agent-based models – [PDF]