Washington State Insurance Practice Exam

What defines the stated amount in an insurance policy?

1. Value determined at the time of loss

2. Depreciated value

3. Value determined at the time the policy is written

4. Market value

The correct answer is: Value determined at the time the policy is written

The stated amount in an insurance policy is defined by the value that is determined at the time the policy is written. This value sets the coverage limits and dictates the maximum amount that the insurer will pay out in the event of a covered loss. It is essential for both the insurer and the policyholder to agree on this value at the inception of the policy to ensure proper coverage. Options A, B, and D are not correct because the stated amount is not determined at the time of loss, based on depreciated value, or tied to market value. Instead, it is set when the policy is written to establish the foundation for the coverage provided throughout the policy term.