Contract stated value is a term you`ll often come across in the insurance industry, particularly in the context of aviation insurance. It refers to the maximum amount that an insurance company is willing to pay out in the event of a total loss of an aircraft or any other insured property. Basically, it`s the maximum amount stated on the insurance policy and a critical factor in determining the premium you`ll pay.
In the aviation insurance industry, contract stated value is often determined by the aircraft`s appraisal value. Insurance companies conduct appraisals to determine the value of your aircraft, taking into account factors such as its age, condition, and market value. The appraisal is then used to set the contract stated value of your aircraft. Note that the contract stated value does not necessarily represent the actual cash value of your aircraft; it`s merely the maximum amount the insurance company will pay out in case of total loss.
It`s important to note that underinsurance can be a significant problem when it comes to contract stated value. If you insure your aircraft for less than its actual value, you may find yourself in a tricky situation should you need to make a claim. In such cases, the insurer may only pay out up to the contract stated value, regardless of the actual value of the aircraft or property. Therefore, it`s essential to ensure that the contract stated value accurately reflects the value of your insured property.
Another essential point to remember is that making modifications or upgrades to your property can impact your contract stated value. If you upgrade your aircraft or make modifications that increase its value, you`ll need to inform your insurance company so that they can adjust the contract stated value accordingly. Conversely, if you make modifications that decrease the value of your aircraft, you may be able to reduce your contract stated value and pay lower premiums.
In summary, contract stated value is a crucial term in aviation insurance that can impact your coverage and premiums. It represents the maximum amount that the insurance company will pay out in case of total loss, and you must ensure that it accurately reflects the value of your insured property. Always keep your insurer informed of any modifications or upgrades you make to your property to avoid underinsurance or overpaying for your coverage.