Insurance Topic
Loss Settlement Provision
A loss settlement provision is a policy clause that defines how the insurer determines the amount payable for a covered loss.
Definition
The loss settlement provision is the portion of an insurance policy that governs the valuation method, payment basis, and conditions applied when settling a covered loss. It establishes whether payment is based on actual cash value, replacement cost value, or another defined measurement, and specifies prerequisites for each method.
Structural Components
- Valuation basis used to calculate loss amounts
- Conditions required to qualify for specific settlement methods
- Timing and form of payment provisions
- Interaction with deductibles and coverage limits
- References to depreciation treatment, if applicable
Parameters & Conditions
- Applies only to losses caused by covered perils
- Subject to policy limits and deductible structures
- May require repair or replacement completion for full payment
- Can differ by coverage type within the same policy
- Operates in conjunction with policy definitions and exclusions
Topic Relationships
Exceptions, Limitations & Boundaries
The loss settlement provision does not create coverage where none exists and does not override exclusions, sublimits, or policy conditions. Disputes regarding valuation may still be subject to appraisal or other policy dispute-resolution mechanisms.
Loss Settlement Provision: Definitional FAQ
Is the loss settlement provision the same as coverage?
No. It determines how payment is calculated after a covered loss, not whether a loss is covered.
Can a policy have more than one loss settlement method?
Yes. Different coverages within the same policy may use different settlement methods.
Does the loss settlement provision affect claim timing?
Yes. Certain settlement methods require conditions to be met before full payment is issued.