What is an open policy in insurance?

An open policy in insurance is characterized by the fact that the value of the insured property is determined after a loss occurs. This means that the policy does not stipulate a fixed dollar amount for coverage upfront; instead, the actual value is assessed at the time of the claim. This approach is often used for properties whose worth may fluctuate or for unique items whose valuation can be subjective and determined based on the conditions prevailing at the time of loss.

In contrast, an open policy differs significantly from a valued policy, which specifies the coverage amount in advance, regardless of the actual value at the time of loss. Additionally, open policies are distinct from those that only cover specified risks and perils, as they provide broader coverage without limiting the risks in advance. Finally, while any claim process will typically require evidence of loss, this is not a defining feature of an open policy; rather, it is a standard procedure across various types of insurance policies.