The agreed amount provision eliminates which clause?

The agreed amount provision is a specific feature in insurance policies that establishes the amount of coverage for a property or a particular risk, eliminating the need for coinsurance. In a coinsurance clause, policyholders are typically required to insure their property to a certain percentage of its value; failure to do so can result in reduced claim payments proportional to the amount of insurance compared to the value of the property. The agreed amount provision bypasses this requirement by specifying a predetermined amount that both the insurer and insured agree is the value for coverage, ensuring that the policyholder is not penalized in the event of a loss due to insufficient coverage.

This provision provides clarity and assurance for both parties, as the designated coverage amount is agreed upon upfront, removing ambiguity about valuation at the time of a claim. Therefore, it effectively negates the need for a coinsurance clause in policies where this provision is in place, as the agreed value is typically in line with the actual insurable value without necessitating further proportionality calculations.