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Simple English definitions for legal terms
agreed-amount clause
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A quick definition of agreed-amount clause:
Agreed-Amount Clause: This is a part of an insurance policy that says the insured person or company has agreed to carry a certain amount of coverage. This means that if something bad happens and the insured needs to make a claim, the insurance company will pay up to the agreed amount to help cover the costs. It's like making a promise to have enough insurance to protect yourself or your business.
A more thorough explanation:
An agreed-amount clause is a provision in an insurance policy that requires the insured to carry a specific amount of coverage. This means that the insurer and the insured have agreed upon the amount of coverage that will be provided in the event of a claim.
Let's say that John owns a car worth $20,000. He purchases an auto insurance policy with an agreed-amount clause that states he will carry $20,000 in coverage. If John gets into an accident and his car is totaled, the insurance company will pay out the agreed-upon amount of $20,000 to cover the cost of the car.
Another example could be a homeowner's insurance policy with an agreed-amount clause for the value of the home. If the home is destroyed in a fire, the insurance company will pay out the agreed-upon amount to cover the cost of rebuilding the home.
These examples illustrate how an agreed-amount clause works by setting a specific amount of coverage that the insured must carry. This helps to ensure that the insured is adequately protected in the event of a claim, and that the insurer knows exactly how much they will need to pay out.