There are a few types of valuation that insurance policies use. These are:
Actual Cash Value (ACV)- also known as market value, is the standard that insurance companies arguably prefer when reimbursing policyholders for their losses. Actual cash value is equal to the replacement cost minus any depreciation (ACV = replacement cost - depreciation). It represents the dollar amount you could expect to receive for the item if you sold it in the marketplace. The insurance company determines the depreciation based on a combination of objective criteria (using a formula that takes into account the category and age of the property) and subjective assessment (the insurance adjuster's visual observations of the property or a photograph of it). In the case of custom motorcycles this objective criteria is harder to determine and an independent appraisal may help
Replacement Cost Value (RC)- this is the cost to replace with new. This is available from some companies for standard manufacturers (Harley, Yamaha, Honda, etc) if you are the original titleholder and only lasts for a period of a few (2-3)years. As some manufactured customs become more mainstream they may be added by insurance companies.
Stated Value- this term can be easily confused with "agreed value". Stated value means that the policy will pay the actual cash value
not to exceed the amount stated on the declarations page.
Agreed Value - agreed value is an amount agreed upon by the insurance company that it will pay in event of a total loss. This is available on very few auto policies and no motorcycle policies except those for antique motorcycles that we are aware of. You will pay more for this type of coverage than ACV or even RC.
As an informed insurance buyer, if you are concerned with this than you should ask which type is available as part of your buying process.
The insurance policy is a contract and you should insist on having it in writing. The section of the insurance policy that deals with this is titled "Loss Settlement"
