Final answer:
A Valued Policy is an insurance policy that provides a specific replacement cost for a destroyed insured property, paying out a predetermined sum agreed upon beforehand, reducing the need for appraisals at the time of loss and mitigating moral hazard. Option B is correct.
Step-by-step explanation:
The type of policy that is used to provide a specific amount of replacement cost for a given risk after an insured property has been destroyed is called a Valued Policy. This insurance policy specifies the value of an insured item and pays that exact value if a total loss occurs. Doing so simplifies the claims process by having an agreed value beforehand, rather than determining the replacement cost at the time of the loss, which can be contentious and require appraisal.
It protects the insured person from the financial loss associated with the destruction of the property by ensuring that a predetermined sum is paid out. This can mitigate situations of moral hazard, where a person might not take appropriate measures to protect an insured property because they know they have insurance coverage.
A valued policy is a type of insurance policy that provides a specific amount of replacement cost for a given risk after an insured property has been destroyed. The value is predetermined and agreed upon by the insurer and the insured. This type of policy ensures that the insured will be compensated for the full value of the property if it is destroyed, regardless of the actual replacement cost.