How much will insurers pay Gillian for her lost watch under the agreed value policy?

In the context of an agreed value policy, the amount an insurer is liable to pay for a loss is predetermined based on mutual agreement at the outset of the policy. This agreement is specifically important because it establishes the insured sum that the insurer will pay in case of a claim, regardless of the market value or depreciation of the item at the time of loss.

Given that the correct answer is £9,000, it indicates that this was the amount mutually agreed upon by both Gillian and the insurer when the policy was secured. In the event of Gillian’s watch being lost, the insurance policy stipulates that £9,000 would be compensated. This clearly illustrates the purpose of an agreed value policy—they eliminate disputes regarding the value of items at the time of a claim since both parties have already consented to the agreed amount prior to the loss.

Other values listed, although potentially relevant to differing circumstances regarding the watch’s market value or replacement cost, do not reflect the pre-agreed compensation limit outlined in the policy. This reinforces how important it is for both the insured and insurer to clearly define the values covered within an insurance contract to avoid confusion during the claims process.