In a stated amount policy, which option is not one of the three amounts used to determine payment if the property is damaged?

In a stated amount policy, which option is not one of the three amounts used to determine payment if the property is damaged?

• A. The property's actual cash value at time of loss
• B. The cost to repair or replace the property
• C. The market value of the property
• D. The dollar amount of insurance specified in the policy schedule

Answer: (C)

In a stated amount policy, the settlement is based on the least of three figures: the property's actual cash value at the time of loss, the cost to repair or replace the property, or the dollar amount of insurance stated in the policy. Market value isn’t used as a basis for payment because this policy type focuses on replacement or declared value rather than what the property might fetch on the open market. For example, if ACV is $2,000, replacement cost is $3,500, and the policy states $4,000, the payout would be $2,000. If ACV is $3,000, replacement cost $5,000, and the stated amount $3,200, the payout would be $3,000.

In a stated amount policy, the settlement is based on the least of three figures: the property's actual cash value at the time of loss, the cost to repair or replace the property, or the dollar amount of insurance stated in the policy. Market value isn’t used as a basis for payment because this policy type focuses on replacement or declared value rather than what the property might fetch on the open market. For example, if ACV is $2,000, replacement cost is $3,500, and the policy states $4,000, the payout would be $2,000. If ACV is $3,000, replacement cost $5,000, and the stated amount $3,200, the payout would be $3,000.