A contract in which the insurer agrees to pay a specific sum of money no matter what the amount of loss may be.

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Prepare for the North Carolina Health Insurance Test. Study with flashcards and multiple choice questions; each comes with hints and explanations. Get ready for your assessment!

Multiple Choice

A contract in which the insurer agrees to pay a specific sum of money no matter what the amount of loss may be.

Explanation:
A valued policy pays a fixed dollar amount regardless of the actual loss. That's what this description is getting at—the insurer commits to a specific sum stated in the contract, no matter how large or small the loss proves to be. This differs from indemnity, which pays only up to the insured’s actual loss (restoring them to their financial position but not paying more than the loss). Reimbursement contracts simply repay expenses incurred, not a flat amount, and warranties are promises about contract terms rather than payout structures. So the description best fits a valued policy.

A valued policy pays a fixed dollar amount regardless of the actual loss. That's what this description is getting at—the insurer commits to a specific sum stated in the contract, no matter how large or small the loss proves to be. This differs from indemnity, which pays only up to the insured’s actual loss (restoring them to their financial position but not paying more than the loss). Reimbursement contracts simply repay expenses incurred, not a flat amount, and warranties are promises about contract terms rather than payout structures. So the description best fits a valued policy.

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