Registered Insurance Brokers of Ontario (RIBO) Practice Exam

A valued policy is characterized primarily by the fact that it establishes a predetermined amount that will be paid in the event of a total loss at the time the policy is issued. This means that both the insurer and the insured agree on a specific valuation of the property at the onset of the policy, which eliminates any disputes regarding the payout amount in case of a total loss.

This is particularly relevant because it provides certainty to both parties. The insured knows exactly what compensation they can expect if their property is completely lost, while the insurer’s liability is capped at the agreed value, regardless of the property's actual market value at the time of loss. This is different from other types of policies that may calculate payouts based on the actual cash value or replacement cost at the time of the loss, which can lead to varying amounts depending on market conditions and depreciation.

In contrast, other options do not accurately describe the essence of a valued policy. Premium discounts, specific property applicability, or market value considerations do not define the unique and crucial characteristic of a valued policy as establishing a fixed payout amount at the time of issuance.