Which policy type pays a fixed amount upon loss, regardless of the actual loss value?

• A. Valued policy
• B. Contract of indemnity
• C. Binder
• D. Direct-action statute

Answer: (A)

Payouts are fixed when a valued policy is involved. A valued policy sets a pre-determined amount to be paid if a total loss occurs, regardless of the actual value of the property or the loss. This means the insurer meets the stated amount even if the replacement cost or market value at the time differs from that figure. This contrasts with an indemnity approach, where payment equals the actual loss incurred, up to the policy limit, so the payout can vary. A binder is only a temporary coverage document, not a payout rule, and a direct-action statute concerns who can sue whom after a loss, not how losses are paid. So the fixed amount upon loss is characteristic of a valued policy.