Under a Stated Amount policy, what will the insurer pay in the event of a loss?

Under a Stated Amount policy, the insurer will pay the stated amount or the Actual Cash Value (ACV), whichever is less, in the event of a loss. This type of insurance policy allows policyholders to determine a specific amount that they believe their property is worth, and this amount is recorded on the policy.

In the event of a loss, the insurer will assess the situation and compare the stated amount to the actual cash value of the damaged property. If the stated amount is higher than the ACV, the insurer will pay the ACV, as they will only cover the actual depreciated value of the property at the time of loss. Conversely, if the ACV is higher, the insurer will pay the stated amount. This mechanism ensures that the policyholder receives a payment that reflects the true value of their property while also protecting the insurer from excessive payouts.

This distinctive feature of a Stated Amount policy makes it different from other types of policies that might offer either actual cash value or full replacement cost, which could lead to different coverage scenarios in the event of a loss.