Question

A couple has insured their home for $150,000. A fire ensues and guts their home, resulting in a total loss. An appraisal of the home prior to loss results in a value of $120,000, yet the adjuster is required by law to pay the couple $150,000. This is known as the application of:

(A)The valued policy law.
(B) Payment of policy limits plus a penalty for over-insuring the home.
(C) Replacement cost value
(D) Actual cash value

Answer 1

The valued policy law is a legal principle that requires an insurer to pay the full amount specified in a policy, regardless of the actual value of the property at the time of loss.

Step-by-step explanation:

The correct answer is (A) The valued policy law.

The valued policy law is a legal principle that requires an insurer to pay the full amount specified in a policy, regardless of the actual value of the property at the time of loss. In this case, the couple insured their home for $150,000, and even though the appraisal prior to the loss valued the home at $120,000, the adjuster is required by law to pay the couple the full insured amount of $150,000.