Explain to what extent a valued policy modifies the principle of indemnity.

Under a valued policy, in the event of a total loss, the insurers must pay the agreed value regardless of the actual value at the time of the loss, even if they can prove beyond doubt that the value of the property has declined since the insurance was opened. The insured may, therefore receive more than a full indemnity. They may also receive less than indemnity if the actual value has increased. If the initial valuation is grossly excessive, the policy might be voidable for fraud or misrepresentation or even void as a gaming policy under the Gaming Act 1845. The insured will normally be required to substantiate the value for which they seek to insure by providing an expert valuation at inception and so problems rarely arise in practice. Valued policies are those policies where the value of the property is agreed before hand and which is made the sum insured under the policy. The condition of such a policy is that if a total loss than the full sum insured is to be paid even though the actual value is less than the sum insured. Here, the insured makes a gain. If the actual value is more than the sum insured then the insured sustain losses. The following points should be noted in this regard - Only in case of a total loss there is the possibility of making either over-payment or under-payment. From experience it can be said that the possibility of total loss is very rare as mostly we experience partial losses. In case of partial loss, which is more common, the loss is treated under normal indemnity basis. Undervalued policies, the value that is agreed upon at inception is not just an arbitrary value but a value having a very realistic bearing on the actual market value. Valued policies are not usually given to those parsons whose bona-fides are not in the knowledge of insurers. In other words, issuance of valued policies are very restricted. Valued policies are usually issued on articles of fairly stable value. It may be said that under valued policy the measure of indemnity is decided at the inception as opposed to ordinary policies where the measure of indemnity is decided at the time of claim. Valued policies actually considered as contracts of indemnity in law and considering the above points it can very well be said that valued policies are in fact modifications of the principle of indemnity and certainly not departures from the principle of indemnity.